1. UNIT - VII

2. INTRODUCTION TO FINANCIAL ACCOUNTING

3. Introduction to Final Final Accounts
Finance means Cash, Money, Price, Value and Cost
Its relating to Monetary benefit
Basically 3 Concepts

4. Introduction to Final Final Accounts
Account – It’s a summarized statement of Debit and Credit
Accounting – it’s a process of all types of accounts such as PA, RA & NA
Accountancy – its law of accounts.

5. Introduction to Accounting
Accounting is a old concept. It was introduced by Edward Jones in 1795 in the books of “Modern Accounting System”.
Accounting is “Method of Identifying, Classifying, Summarizing in a significant manner in terms of Money”.

6. Principles of Accounting
Recording
Identifying
Classifying
Summarizing
Balancing
Eg. 1. Mr. Ramu Purchased a book of Rs. 150/- from kiran at Koti.
2. Mrs. Aishwarya Sold a Machinery of Rs /- to Bharati by cash.

7. Types of Financial Accounting
Personal Accounts
Real Accounts
Nominal Accounts

8. Types of Accounting Financial Accounting Management Accounting
Cost Accounting

9. Concepts of Accounting
Money Measurement concept
Business Entity concept
Going concern concept
Cost concept
Dual aspect concept
Accounting period concept
Matching concept
Reliasation concept
Objective concept
Other concepts

10. Conventions of Accounting
Convention of Disclose
Convention of Consistency
Convention of Conservatism
Convention of Materiality

11. Principles of Double Entry system
Personal Accounts
Real Accounts
Nominal Accounts
Debit
Credit
Debit
Credit
Debit
Credit
Receiver
Giver
What comes in
What goes out
Exp and Loss
Income & Gain

12. Journal
When the size of the business firm is big. All the business transections are first recorded in a Rough Book, before entering them in “JOURNAL”.
After words these transactions are recorded in a chronological order.
After analyzing, classifying these benefits according to the principles of debit & Credit is called “Journal”.

13. Advantages of Accounting
Replacing money
Assisting the performance of the business
Assessing the financial status of the business
Documentary evidence
Assisting in realisation of debts.
Facilitating & detecting frauds
Preventing & detecting frauds
Help full to Management

14. Classification of Ledger
Debtors ledger
Creditors ledger
General ledger
Self ledger

15. Types of Subsidiary books
Purchase book
Sales book
Purchase returns book
Sales returns book
Cash book
Bill receivable book
Bills payable book
Journal proper

16. Characteristics of Cash book
It can also be treated as a subsidiary book
Like ledger, there are the debit and credit columns in cash book
Only cash transactions are recorded
It always shows debit balance but it never shows the credit balance
The balance of cas can be known at any point of time

17. Types of cash transactions
Cash Receipts
Cash Payments

18. Types of Cash books Simple cash book Double column cash book
Triple column cash book
Petty cash book

19. Trial Balance
M.S gosav defined the Trail Balance as “The Trail balance is a statement containing the balances of all ledger accounts., as at any given date, arranged in the form of debit and credit columns placed side by side and prepared with the object of checking the arithmetical accuracy of the ledger postings”.

20. Characteristics of Trial Balance
Basically Trial Balance is a statement or list
It contains all the Debit and Credit balances
It total debit balances must be equal in aggregate to the total of the credit balances when accounts are balanced at any given time.
Trial Balance is the only base for the preparation of final accounts

21. Advantages of Trial balance
Preparation of final accounts will become easy with the preparation of Trail balance
When the total balance of debit is equal to the total balance of credit in a trial balance one can confidently rely on the results derived out of such trail balance.

22. Final Accounts Relating to Trading Concern Trading Account
Profit & Loss Account
Balance sheet
Relating to Manufacturing Firm
Manufacturing Account
Balance Sheet

23. Importance of Trading Account
We can ascertain Gross Profit / Gross Loss
We can observe the changes in direct expenses.
We can calculate the cost of production
We can establish the relation b/w the costs and revenues
We can analyze the trend in sales
We can decide the earning capacity of the firm

24. Importance of Profit & Loss Account
The main purpose of preparing the Profit & Loss account is to ascertain Net profit / Net Loss of the firm
It is also useful to establish a relationship b/w the sales and the total indirect expenses through percentages.
Its relating to the expenses and Incomes of the firm

25. Balance Sheet
“Balance Sheet is a statement prepared on a particular date of reflect the financial position of the firm with all assets and liabilities of the firm”.

26. Types of Balance Sheet Rigidity preference order
Liquidity preference order