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Prepared by:
Ajith Kanthi @ Ajith P P
SKMJ HSS Kalpetta
Wayanad, Kerala
Ph: 9446162771, 7907712665
ajithkanthi@gmail.com
For latest updates, visit: HssVoice Blog
www.hssplustwo.blogspot.com
ACCOUNTING
Information system
Receives data input
Processing data
Gives output for decision making
Father of Accounting
Luca Pacioli
(Italian Mathematician)
1447 – 1517
Accounting
Art of recording
Classifying
Summarizing
Analysing
Interpreting
Financial transactions and
Communicating the results to
Interested persons
Functions of Accounting
1.Recording – business transactions in journal
2.Classifying - with the help of accounts
3.Summarising – trial balance etc.
4.Deals only in financial transactions
5.Analyses and interprets data
6.Communicates – the information to the needy
Relevant
Relevant Aspects
Aspects of
of Accounting
Accounting
1. Economic Event
a. External Event b. Internal Event
Sale of goods Issue of raw materials from stores
to production department
Relevant
Relevant Aspects
Aspects of
of Accounting
Accounting
2. Identification, measurement, recording and communication
Identification of events Measurable
Recording Communication
Relevant
Relevant Aspects
Aspects of
of Accounting
Accounting
3. Organisation
An entity stands for performing business activities either for
profit or not for profit. It can be a sole proprietorship,
partnership, cooperative society, company etc.
Relevant
Relevant Aspects
Aspects of
of Accounting
Accounting
4. Interested users
Management
Internal Users
Chief Executive, Financial Officer, Vice President,
Business Unit Managers, Plant Managers, Store
Managers, Line Supervisors, etc.
External Users
Shareholders, Creditors, Tax Authorities,
Regulatory Agencies, Trade Unions, Stock
Exchanges, Customers etc.
Investors Lenders Stock Exchange
Customers
Branches of Accounting
Financial
Accounting
Cost
Accounting
Management
Accounting
Ajith Kanthi Wayanad
www.hssplustwo.blogspot.com
Qualitative characteristics of
accounting information
1. Reliability
Qualitative characteristics of
accounting information
2. Relevance
Qualitative characteristics of
accounting information
3. Understandability
Qualitative characteristics of
accounting information
4. Comparability
Objectives of Accounting
1. To maintain business records
Loss of
memory
Objectives of Accounting
2. Calculation profit or loss
Objectives of Accounting
3. To ascertain financial position
Objectives of Accounting
4. Providing information to users
Ajith Kanthi Wayanad
www.hssplustwo.blogspot.com
Basic Accounting Terms
1. Entity
Entity means a reality that has a definite individual existence
Business Entity means a business enterprise
Basic Accounting Terms
2. Transactions
Economic events in a business organization
Eg: Purchses, Sales, Salary etc.
Basic Accounting Terms
3. Assets
Economic resources which can be expressed in monetary terms
Classification of Assets
Distinction between current and non-
current items:
● Current assets or liabilities are involved in
operating cycle.
● Current assets or liabilities are
realised/settled within 12 months.
● Current items are primarily for trading.
● Current items are cash or cash equivalent.
Basic Accounting Terms
4. Liabilities
Short Term Liability Long Term Liability
The amount payable by the business in future
Classification of Liabilities
Basic Accounting Terms
5. Capital
Investment made by the owners
Basic Accounting Terms
6. Sales
Total revenue earned by a business through
sale of goods or services to customers
It includes cash sales and credit sales
Basic Accounting Terms
7. Revenue or income
The amount a business earns through the sales,
interest received, dividend received, rent received,
commission received, discount received etc.
Basic Accounting Terms
8. Expenses
Salary Stationery
The amount spent to earn revenue
Eg; Rent, Wages, Salaries etc.
Basic Accounting Terms
9. Expenditure
Capital Expenditure Revenue Expenditure
Capital Expenditure
Benefit of expenditure lasts for more than one year
Revenue Expenditure
Benefit of expenditure exhausted within a year
Basic Accounting Terms
10. Profit
The excess of revenue over expenses in an accounting
year which represents increase in capital
Basic Accounting Terms
11. Gain
A profit that arises from events or transactions which are
incidental to business such as sale of fixed assets,
winning a court case, appreciation in the value of an
asset etc.
Basic Accounting Terms
12. Loss
The excess of expenses over revenue in an accounting
year which represents reduction in capital
Basic Accounting Terms
13. Discount
Trade Discount Cash Discount
Deduction in the price of the goods sold
Basic Accounting Terms
14. Voucher
The documentary evidence in support of a transaction
Eg: Cash Memo, Invoice, Cash Receipt etc.
Basic Accounting Terms
15. Goods
Commodities, products, articles or things in which a
trader deals
Basic Accounting Terms
16. Drawings
The amount of cash or other assets withdrawn by the
owner for his personal use
Basic Accounting Terms
17. Purchase
Expense incurred for procurement of goods in a
business
It includes both cash purchase and credit purchase
Basic Accounting Terms
18. Stock / Inventory
Unsold goods / raw materials / semi finished goods at
the end of accounting year
Closing Stock & Opening Stock
Basic Accounting Terms
19. Debtors / Accounts Receivable
Debtor
The person who owes money to the business
Basic Accounting Terms
20. Creditors / Accounts Payable
Creditors
The person to whom the business owes money
Prepared by:
Ajith Kanthi @ Ajith P P
SKMJ HSS Kalpetta
Wayanad, Kerala
Ph: 9446162771, 7907712665
ajithkanthi@gmail.com
For latest updates, visit: HssVoice Blog
www.hssplustwo.blogspot.com
