BCOC-131
FINANCIAL ACCOUNTING.
1:- NATURE AND SCOPE OF ACCOUNTING
Accounting
Accounting is the process of of keeping records of money earned and spent by a person
Organisation It involves systematically Recording, Summarizing and reporting financial
transactions to provide insights into organization's an financual performance and position
Accounting - Definition
According Accounting to American Accounting Association Accounting is the process and
Communicating economic ifling. of identif if fing, measuring information to permit informed
judgements and decisions by the users of accounting".
Need of Accounting
*The basic need of ace of accounting is know the financial position of business
* To know profit and loss account of business (Tracking Financial performance)
* Performance evaluation and Strategic planning
* It helps business comply with legal and financial reporting requirements.
Objectives of accounting
i)To keep systematic records: Accounting is done to keep a systematic record of financial
transactions. Systematic record of various assets and liabilities of the business is also to be
maintained.
ii) To ascertain the net effect of the business operations i.e., profit or
loss of business: We know that the primary objective of business is to make profit and the
businessman is very much interested in knowing the same. A proper record of income and expenses
facilitates the preparation
of the profit and loss account (income statement). The profit and loss account reveals the profit
earned or loss incurred by the business firm during a particular period.
iii) To ascertain the financial position of the business:
The businessman is not only interested in knowing the operating results, but also interested in
knowing the financial position of his business i.e., where it stands. In other words, he wants to
know when the business owes to others and what it owns and what happened to his capital –
whether the capital increased or decreased or remained constant. A systematic record of various
, assets and liabilities facilitates the preparation of a statement known as ‘balance sheet’ (position
statement) which answers these questions.
iv) To provide accounting information to interested parties: Apart from the owners, there are
various other parties who are interested in knowing about the business firm, such as the
management, the bank, the creditors, the tax authorities, etc. For this purpose, the accounting
system has to furnish the required information.
Book keeping
Bookkeeping is the process of systematic recording and classification of financial transactions of an
organisation.
Bookkeeping process consists of the following steps:
1. Identifying a financial transaction
2. Recording a financial transaction
3. Preparing a ledger account
4. Preparing trial balance
Users of Accounting
Internal Users:
• Owners/Shareholders: Assess business performance and the value of their investment.
• Managers: Plan, monitor, and make business decisions.
• Employees: Used to understand compensation and job security.
• Internal Auditors: Assess the accuracy and reliability of financial statements.
• Management: Use financial information for operational and strategic decisions.
External Users:
• Investors: Assess the risk and return of potential investments.
• Lenders: Assess a company's ability to repay loans.
• Creditors: Assess a company's ability to settle trade obligations.
• Suppliers: Assess the creditworthiness of customers before offering credit.
• Customers: May be indirectly interested in a supplier's financial health to ensure delivery.
• Government: Used for tax and regulatory purposes.
• Tax Authorities: Determine whether a business has declared the correct amount of tax.
• Regulatory Agencies: Ensure compliance with accounting standards and regulations.
• The Public: Use financial information for research and financial news.
• Analysts: Analyze financial information to assess the financial health of a company.
• Potential Investors: Assess the financial health of a company before investing.
FINANCIAL ACCOUNTING.
1:- NATURE AND SCOPE OF ACCOUNTING
Accounting
Accounting is the process of of keeping records of money earned and spent by a person
Organisation It involves systematically Recording, Summarizing and reporting financial
transactions to provide insights into organization's an financual performance and position
Accounting - Definition
According Accounting to American Accounting Association Accounting is the process and
Communicating economic ifling. of identif if fing, measuring information to permit informed
judgements and decisions by the users of accounting".
Need of Accounting
*The basic need of ace of accounting is know the financial position of business
* To know profit and loss account of business (Tracking Financial performance)
* Performance evaluation and Strategic planning
* It helps business comply with legal and financial reporting requirements.
Objectives of accounting
i)To keep systematic records: Accounting is done to keep a systematic record of financial
transactions. Systematic record of various assets and liabilities of the business is also to be
maintained.
ii) To ascertain the net effect of the business operations i.e., profit or
loss of business: We know that the primary objective of business is to make profit and the
businessman is very much interested in knowing the same. A proper record of income and expenses
facilitates the preparation
of the profit and loss account (income statement). The profit and loss account reveals the profit
earned or loss incurred by the business firm during a particular period.
iii) To ascertain the financial position of the business:
The businessman is not only interested in knowing the operating results, but also interested in
knowing the financial position of his business i.e., where it stands. In other words, he wants to
know when the business owes to others and what it owns and what happened to his capital –
whether the capital increased or decreased or remained constant. A systematic record of various
, assets and liabilities facilitates the preparation of a statement known as ‘balance sheet’ (position
statement) which answers these questions.
iv) To provide accounting information to interested parties: Apart from the owners, there are
various other parties who are interested in knowing about the business firm, such as the
management, the bank, the creditors, the tax authorities, etc. For this purpose, the accounting
system has to furnish the required information.
Book keeping
Bookkeeping is the process of systematic recording and classification of financial transactions of an
organisation.
Bookkeeping process consists of the following steps:
1. Identifying a financial transaction
2. Recording a financial transaction
3. Preparing a ledger account
4. Preparing trial balance
Users of Accounting
Internal Users:
• Owners/Shareholders: Assess business performance and the value of their investment.
• Managers: Plan, monitor, and make business decisions.
• Employees: Used to understand compensation and job security.
• Internal Auditors: Assess the accuracy and reliability of financial statements.
• Management: Use financial information for operational and strategic decisions.
External Users:
• Investors: Assess the risk and return of potential investments.
• Lenders: Assess a company's ability to repay loans.
• Creditors: Assess a company's ability to settle trade obligations.
• Suppliers: Assess the creditworthiness of customers before offering credit.
• Customers: May be indirectly interested in a supplier's financial health to ensure delivery.
• Government: Used for tax and regulatory purposes.
• Tax Authorities: Determine whether a business has declared the correct amount of tax.
• Regulatory Agencies: Ensure compliance with accounting standards and regulations.
• The Public: Use financial information for research and financial news.
• Analysts: Analyze financial information to assess the financial health of a company.
• Potential Investors: Assess the financial health of a company before investing.
