Accounting For Managers Prepared by Dhanya.K.A

INTRODUCTION TO ACCOUNTING

Accounting Meaning Definition AICPA- “the art of recording ,classifying and summarizing in a significant manner and in terms of money transactions or events which are ,in part at least, of a financial character, and interpreting the results thereof”

(unadjusted & adjusted Accounting process Transaction Business documents Journal Ledger P&L account Trial Balance (unadjusted & adjusted Balance Sheet

USERS Shareholders, security analyst, investors Lenders Suppliers/Creditors Customers Employees Government and regulatory agencies Research

Generally accepted accounting principles Meaning of GAAP Conventions and concepts Materiality concept Money measurement cost concept Time period concept Conservatism concept

Consistency concept Business equity concept Going concern concept Duality concept Accounting period concept Realization concept Matching concept

Double entry system Concept of capital and income True and fair view of accounts

ACCOUNTING STANDARDS

International Vs Indian Accounting standards IASC in 1973 Objective- Formulating ,publishing & promoting the use of accounting stds Harmonization of procedures No of accounting std issued ASB in 1977 Objective- Frame accounting stds No of accounting std issued Procedure

Importance Ideal practice of accounting Uniformity in presentation Comparability of accounts Clear position of state of affairs Auditors duties Accounting standards issued US GAAP

ACCOUNTING MECHANICS

Basic Accounting Mechanics Double entry system Duality concept Accounting equation owner’s equity+ outside liability= Assets ( Sources of funds = Uses of funds) Symbols for sources and uses

Nature of Debit and Credit Outflow Debtors Inflow of Resources Creditors income liabilities Expenses Assets

Types of Accounts Personal accounts - natural person - Representative Real accounts - Tangible - Intangible Nominal accounts - expenses/income - losses/ gains

Rules of debit and credit Personal Accounts Real Accounts Nominal Accounts Debit Credit Debit Credit Debit Credit All Expenses & Losses All Incomes & Gains The receiver The giver What Comes in What Goes out

Books of accounts Cash book Journal Ledger A conceptual framework of accounting

Subsidiary books Purchases book Date Name of Supplier Ledger folio - Credit purchase of goods only Date Name of Supplier Ledger folio Inward Invoice no Amount

Purchases Returns Book Date Name of supplier Ledger Folio Debit Note no Amount

Sales Book - sale of goods on credit Date Name of customer Ledger folio Outward invoice Amount

Sales Returns Book Date Name of Customer Ledger Folio Credit Note No Amount

Bills receivable book - Date - From whom received - Acceptor - Date of bill - Term - Date of maturity - Where payable - Amount - How disposed

Bills payable Book - Date - Name of Drawer - Payee - Date of bill - Term - Date of maturity - Where payable - Amount

Journal proper Entries which cannot be included in any other subsidiary books Eg: Sale or purchase of fixed assets adjustment entries rectification entries

Bank reconciliation statement Ensure the accuracy of transactions appearing in the bank columns of cash book Cash book and pass book Bank statement

Reasons for difference between bank balance as per cash book and pass book Cheques issued but not presented Cheques received but not collected Deposits directly made by customers Collection charges, service charges and interest on OD charged by bank Interest credited or any other amount collected directly by bank Dishonor of cheques, wrong entries or omissions of entries

Advantages of BRS Error detection Delay in collection revealed Completion of cash book Chances of embezzlements are reduced

Steps in preparation of BRS Take the cash book or passbook balance as starting point i. Dr.balance as per cash book - favorable balance ii.Cr.balance as per cash book –Overdraft/ Unfavorable balance iii. Dr. balance as per pass book- Overdraft/ Unfavorable balance iv.Cr.balance as per pass book– favorable balance

Continue… If starting point denotes a favorable balance take it as a positive figure If starting point denotes unfavorable balance take it as a negative figure Add or deduct the discrepancies from starting point as per information After adjusting all errors the balance as per other book is obtained