mr ranjit singh ppt
TRANSCRIPT
-
7/29/2019 Mr Ranjit Singh Ppt
1/77
1
Accountingand
FinancialManagement
-
7/29/2019 Mr Ranjit Singh Ppt
2/77
2
Introduction to
Accounting
Accounting
& Financial
Management
-
7/29/2019 Mr Ranjit Singh Ppt
3/77
3
Accounting An Information Process
Users of Accounting Information GAAP
The Accounting Equation
Double Entry System
Introduction to Accounting
-
7/29/2019 Mr Ranjit Singh Ppt
4/77
4
is the language of business.
Accounting...
-
7/29/2019 Mr Ranjit Singh Ppt
5/77
5
Accounting is the information system that...
measures business activities,
processes data into reports, and
communicates results to decision makers.
Accounting
The Language of Business
-
7/29/2019 Mr Ranjit Singh Ppt
6/77
6
Definitions of Accounting
The process of identifying, measuring, andcommunicating economic information to permitinformed judgements and decisions by users of theinformation.
American Accounting Association (AAA)
A service activity whose function is to providequantitative information, primarily financial in nature,about economic entities that is intended to be useful inmaking economic decisions.
American Institute of Certified Public Accountants (AICPA)
-
7/29/2019 Mr Ranjit Singh Ppt
7/77
Accounting as an Aid to
Decision Making
Accounting helps in decision making by showing
where and when money has been spent, by
evaluating performance, and by showing the
implications of choosing one plan instead ofanother.
Fundamental relationships in the decision-making
process:
Event
Accountants
analysis and
recording
Financial
statementsUsers
-
7/29/2019 Mr Ranjit Singh Ppt
8/77
8
Accounting An Information Process
Identificationof Users
-
7/29/2019 Mr Ranjit Singh Ppt
9/77
9
UserInformation
Needs
Accounting An Information Process
Identificationof Users
-
7/29/2019 Mr Ranjit Singh Ppt
10/77
10
Identificationof Users
UserInformation
Needs
AccountingSystem
Accounting An Information Process
-
7/29/2019 Mr Ranjit Singh Ppt
11/77
11
Identificationof Users
UserInformation
Needs
AccountingSystem
Economic Dataand Activities
Accounting An Information Process
-
7/29/2019 Mr Ranjit Singh Ppt
12/77
12
Identification
of Users
UserInformation
Needs
AccountingSystem
Economic Dataand Activities
Reports
Accounting An Information Process
-
7/29/2019 Mr Ranjit Singh Ppt
13/77
13
Identification
of Users
UserInformation
Needs
AccountingSystem
Reports
Economic Dataand Activities
UserDecisions
Accounting An Information Process
-
7/29/2019 Mr Ranjit Singh Ppt
14/77
14
The Flow of Accounting Information
1. Business transactions
occur
3. People make decisions.
2. Businesses prepare reports to
Show the results of their operations
-
7/29/2019 Mr Ranjit Singh Ppt
15/77
15
Individuals
Businesses
Investors andcreditors
Governmentregulatoryagencies
Taxingauthorities
Nonprofitorganizations
Users of Accounting Information
-
7/29/2019 Mr Ranjit Singh Ppt
16/77
16
EXTERNAL USERS
Financial Accounting
investors
creditors
regulators
customers
competitors
Users of Accounting Information
-
7/29/2019 Mr Ranjit Singh Ppt
17/77
17
EXTERNAL USERS
Financial Accounting investors
creditors
regulators
customers competitors
owners
managers
employees
INTERNAL USERS
FinancialAccounting
Users of Accounting Information
-
7/29/2019 Mr Ranjit Singh Ppt
18/77
18
External users
make decisions
aboutthe entity.
Internalusers
make decisions
forthe entity.
Users of Accounting InformationUsers of Accounting Information
-
7/29/2019 Mr Ranjit Singh Ppt
19/77
19
The Accounting Equation
-
7/29/2019 Mr Ranjit Singh Ppt
20/77
20
Economic
Resources
Claims to
Economic
Resources
The Accounting Equation
Assets = Liabilities + Owners Equity
-
7/29/2019 Mr Ranjit Singh Ppt
21/77
Accounting data is represented by the
following relationship among the
assets, liabilities and owners equity ofa business:
Assets = Liabilities + Owners Equity
The equation must be in balance aftereveryrecorded transaction in the
system.
The Basic Accounting Equation
-
7/29/2019 Mr Ranjit Singh Ppt
22/77
22
a. Sachin deposits RS 25,000 in a bank accountfor ABC Ltd
ASSETS
=
Business Transactions
OWNERS EQUITY
LIABILITIES
-
7/29/2019 Mr Ranjit Singh Ppt
23/77
23
a. Sachin deposits RS 25,000 in a bank accountfor ABC Ltd.
ASSETS
=
Business Transactions
OWNERS EQUITY
Cash25,000
LIABILITIES
-
7/29/2019 Mr Ranjit Singh Ppt
24/77
24
a. Sachin deposits RS 25,000 in a bank accountfor ABC Ltd.
ASSETS
=
Business Transactions
OWNERS EQUITY
Cash25,000
LIABILITIES
Sachin, Capital25,000
-
7/29/2019 Mr Ranjit Singh Ppt
25/77
25
Business Transactions
b. ABC Ltd. buys land for Rs 20,000.
ASSETS
=OWNERS EQUITY
LIABILITIES
-
7/29/2019 Mr Ranjit Singh Ppt
26/77
26
Business Transactions
b. ABC Ltd. buys land for Rs 20,000.
ASSETS
=OWNERS EQUITY
LIABILITIES
Cash(20,000)
-
7/29/2019 Mr Ranjit Singh Ppt
27/77
27
Business Transactions
b. ABC Ltd buys land for RS 20,000.
ASSETS
=OWNERS EQUITY
LIABILITIES
Cash(20,000)
Land20,000
-
7/29/2019 Mr Ranjit Singh Ppt
28/77
28
Transaction Summary
ASSETS
=OWNERS EQUITY
LIABILITIES
Cash 6,700Purchases 550Land 20,000
Accts. Payable 400
Sachin, Capital 25,000
Sachin, Drawing (2,000)Fees Earned 7,500Wages Expense (2,125)Rent Expense (800)Commission (450)Misc. Expense (275)
-
7/29/2019 Mr Ranjit Singh Ppt
29/77
29
Role of Accounting
Good managers plan for the future.
They develop a budget.
A budget is a formal planstated in monetary terms.
-
7/29/2019 Mr Ranjit Singh Ppt
30/77
30
Role of Accounting
Accounting helps banks decide
to whom they will lend money.
Accounting provides information
that helps investors pick stocks.
-
7/29/2019 Mr Ranjit Singh Ppt
31/77
31
Role of Accounting
ConsultingAssurance
services
includingauditing
Taxaccounting
-
7/29/2019 Mr Ranjit Singh Ppt
32/77
32
Generally Accepted
Accounting Principles
-
7/29/2019 Mr Ranjit Singh Ppt
33/77
33
Full Disclosure Principle
-
7/29/2019 Mr Ranjit Singh Ppt
34/77
34
Revenue Principle
Situation 2
The client has taken a trip arranged by
Air & Sea Travel. Record Revenue
Air & SeaTravel, Inc.
April 2
Air & SeaTravel, Inc.
Situation 1
No transaction has occurred.
Do Not Record Revenue
March 12I plan to have you
make my travelarrangements.
-
7/29/2019 Mr Ranjit Singh Ppt
35/77
35
The Double Entry System
-
7/29/2019 Mr Ranjit Singh Ppt
36/77
36
Double-Entry Accounting
Double-entry accounting is based on a
simple concept: each party in a businesstransaction will receive something and give
something in return. In bookkeeping terms,
what is received is a debit and what is given
is a credit. The T account is a representationof a scale or balance.
Scale or Balance
ReceiveDEBIT
GiveCREDIT
T account
Left SideReceiveDEBIT
Right SideGive
CREDITLuca PacioliDeveloper ofDouble-Entry
Accounting
-
7/29/2019 Mr Ranjit Singh Ppt
37/77
The system records the two-sided
effect of transactions
Transaction Two-sided effectBought furniture for cash Decrease in one asset
Increase in anotherasset
Took a loan in cash Increase in an asset
Increase in a liability
The Double-Entry systemThe Double Entry System
-
7/29/2019 Mr Ranjit Singh Ppt
38/77
Note that the accounting equation equality is
maintained after recordingeach transaction.
The Double Entry System
-
7/29/2019 Mr Ranjit Singh Ppt
39/77
39
Amit depositsRs25,000 in abank account forXYZ Ltd..
Business Transactions
Journal
receiveDebit
giveCredit
XYZ Ltd(investee)
Amit (investor)
giveCredit
Entry A.
Date Description Debit Credit
11/1
-
7/29/2019 Mr Ranjit Singh Ppt
40/77
40
Amit depositsRs25,000 in abank account forXYZ Ltd..
Business Transactions
l Journal
receiveDebit
giveCredit
XYZLtd.(investee)
Cash
Amit (investor)
giveCredit
Entry A.
Date Description Debit Credit
11/1 Cash 25,000
-
7/29/2019 Mr Ranjit Singh Ppt
41/77
41
Amit deposits Rs25,000 in a bankaccount for XYZLtd..
Business Transactions
Journal
Date Description Debit Credit
11/1 Cash 25,000
Amit, Capital 25,000
receiveDebit
giveCredit
XYZLtd.(investee)
Cash A promiseto the owner
Amit (investor)
giveCredit
Entry A.
-
7/29/2019 Mr Ranjit Singh Ppt
42/77
42
XYZ Ltd. buys landfor Rs20,000.
Business Transactions
receiveDebit
giveCredit
XYZ Ltd(buyer)
Land Owner (seller)
giveCredit
Entry B.
Journal
Date Description Debit Credit
11/5
-
7/29/2019 Mr Ranjit Singh Ppt
43/77
43
Amit withdraws Rs2,000 in cash.
Business Transactions
receiveDebit
giveCredit
XYZ Ltd.(payor)
Reduction inobligation
Amit (payee)
giveCredit
Entry H.
Cash
Journal
Date Description Debit Credit
11/30 Amit, Drawing 2,000
Cash 2,000
-
7/29/2019 Mr Ranjit Singh Ppt
44/77
44
The Recording Process
The sequence of steps in recording
transactions:
Transactions Documentation Journal
Financial
Statements
Trial
BalanceLedger
-
7/29/2019 Mr Ranjit Singh Ppt
45/77
45
1. Transactions are analyzedand recorded in journal.
DocumentsJournal
Journal, Ledger, Trial Balance
-
7/29/2019 Mr Ranjit Singh Ppt
46/77
46
1. Transactions are analyzedand recorded in journal.
DocumentsJournal
2. Transactions are postedfrom journal to ledger.
Journal Ledger
Journal, Ledger, Trial Balance
-
7/29/2019 Mr Ranjit Singh Ppt
47/77
47
1. Transactions are analyzedand recorded in journal.
DocumentsJournal
2. Transactions are postedfrom journal to ledger.
Journal Ledger
3. Trial balance is prepared.
Journal, Ledger, Trial Balance
Trial Balance
-
7/29/2019 Mr Ranjit Singh Ppt
48/77
48
Manual Accounting Cycle
1. Transactions are analyzedand recorded in journal.
Documents Journal
-
7/29/2019 Mr Ranjit Singh Ppt
49/77
49
Manual Accounting Cycle
1. Transactions are analyzedand recorded in journal.
Documents Journal
2. Transactions are posted
from journal to ledger.Journal Ledger
-
7/29/2019 Mr Ranjit Singh Ppt
50/77
50
Manual Accounting Cycle
1. Transactions are analyzedand recorded in journal.
Documents Journal
2. Transactions are posted
from journal to ledger.Journal Ledger
3. Trial balance is prepared,
Trial balance
-
7/29/2019 Mr Ranjit Singh Ppt
51/77
51
Manual Accounting Cycle
1. Transactions are analyzedand recorded in journal.
Documents Journal
2. Transactions are posted
from journal to ledger.Journal Ledger
3. Trial balance is prepared,
4. Financial statements areprepared and distributed.
Financial Statements
IS SOE BS
-
7/29/2019 Mr Ranjit Singh Ppt
52/77
52
Computerized Accounting Cycle
1. Transactions are analyzedand entered in the computer.
DocumentsComputer
-
7/29/2019 Mr Ranjit Singh Ppt
53/77
53
Computerized Accounting Cycle
1. Transactions are analyzedand entered in the computer.
DocumentsComputer
2. Preliminary reports areanalyzed, adjustments areprepared and entered in the
computer.ComputerReports Computer
-
7/29/2019 Mr Ranjit Singh Ppt
54/77
54
Computerized Accounting Cycle
1. Transactions are analyzedand entered in the computer.
DocumentsComputer
2. Preliminary reports areanalyzed, adjustments areprepared and entered in the
computer.ComputerReports
3. Financial statements are
printed and distributed.
Computer
-
7/29/2019 Mr Ranjit Singh Ppt
55/77
55
Computerized Accounting Cycle
1. Transactions are analyzedand entered in the computer.
DocumentsComputer
2. Preliminary reports areanalyzed, adjustments areprepared and entered in the
computer.ComputerReports
3. Financial statements are
printed and distributed.Financial Statements
IS SOE BS SCF
Computer
4. Reports are analyzed andinterpreted for decision-making purposes.
?
-
7/29/2019 Mr Ranjit Singh Ppt
56/77
56
Date Ref. Particulars Amount Date Ref Particulars Amount
April 2 1 To G. Cap 30,000
Debit Cash Account Credit
Insert the number of the journal page.
Posting
Recording and Posting an Entry
-
7/29/2019 Mr Ranjit Singh Ppt
57/77
57
L.F.
Date Description Debit Credit
12/1 Prepaid Insurance 2,400
Cash 2,400
Journal Page 1
Recording and Posting an Entry
1. Analyze and record the transaction as shown.
2. Post the debit side of the transaction.
3. Post the credit side of the transaction.
Recording and Posting an Entry
-
7/29/2019 Mr Ranjit Singh Ppt
58/77
58
L.f
Date Description Debit Credit
12/1 Prepaid Insurance 15 2,400
Cash 2,400
Journal
Ledger
Prepaid Insurance AccountDr. Cr.
Page 1
Recording and Posting an Entry
Date Particulars Fol
.
Amt. Date Particulars Fol
.
Amt.
12/1 To Cash 1 2400
Recording and Posting an Entry
-
7/29/2019 Mr Ranjit Singh Ppt
59/77
59
Recording and Posting an Entry
Date Description L.f. Debit Credit
12/1 Prepaid Insurance 15 2,400
Cash 11 2,400
Journal
Ledger Page No.15Prepaid insurance Account
Dr. Cr.
Page 1
13 24
Date Particulars Fol. Amt. Date Particulars Fol. Amt.
12/1 To Cash 1 2400
-
7/29/2019 Mr Ranjit Singh Ppt
60/77
60
TRIAL BALANCE
-
7/29/2019 Mr Ranjit Singh Ppt
61/77
61
Correcting Errors
Three Types of Errors
Journal Entry Ledger Posting
1. incorrect not posted2. correct incorrectly posted
-
7/29/2019 Mr Ranjit Singh Ppt
62/77
-
7/29/2019 Mr Ranjit Singh Ppt
63/77
63
Cash
AccountsPayable
Purchase
Book
Ledger
All subsidiary bookscombinedmake up
the ledger.
Cash transactions
liability accounts
Credit purchases
Subsidiary Books
-
7/29/2019 Mr Ranjit Singh Ppt
64/77
64
SELLING
BUYING
Special Journals
-
7/29/2019 Mr Ranjit Singh Ppt
65/77
65
Rendering of services on account
SELLING
Sales Bookrecordedin
BUYING
Special Journals
-
7/29/2019 Mr Ranjit Singh Ppt
66/77
66
Rendering of services on account
SELLING
Sales Book
Cash Book
Receipt of cash from any source
recordedin
recordedin
BUYING
Special Journals
-
7/29/2019 Mr Ranjit Singh Ppt
67/77
67
Rendering of services on account
SELLING
Sales Book
Cash Book
Purchases Book
Receipt of cash from any source
Purchase of items on account
recordedin
recordedin
recordedin
BUYING
Special Journals
Th S l J l
-
7/29/2019 Mr Ranjit Singh Ppt
68/77
68
3/2 615 MyMusicClub.com 2,2003/6 616 RapZone.com 1,7503/18 617 Web Cantina 2,650
3/27 618 MyMusicClub.com 3,000Totals 9,600
Sales JournalInvoice
Date No. Particulars Details Amount
Page 35
The Sales Journal
All sales on credit are recorded in this journal. Each
sales invoice is listed in numerical order. Thisjournal is often referred to as an invoice register.
-
7/29/2019 Mr Ranjit Singh Ppt
69/77
69
3/3 Howard Supplies 6003/7 Donnelly Supplies 420
3/19 Donnelly Supplies 1,4503/27 Howard Supplies 960
Totals 3,430
Purchases Journal Page 11
The Purchases Journal
All purchases on account are recorded in this journal.
Date Particulars Details Amount
-
7/29/2019 Mr Ranjit Singh Ppt
70/77
70
Cash journals
Single column Cash Book
= Simple cash Book
Double column Cash Book
= Cash Book with bank column
Triple column Cash Book
=Cash Book with Bank & Discount Column Petty Cash Book
= Record small cash payouts
-
7/29/2019 Mr Ranjit Singh Ppt
71/77
71
The Financial Statements
The financial statements are a picture
of the company in financial terms.
Each financial statement relates to a specific
date or covers a particular period.
Information Reported on the Financial
-
7/29/2019 Mr Ranjit Singh Ppt
72/77
72
Information Reported on the Financial
Statements
1. How well did the
company perform(or operate) during
the period?
Revenues
Direct Expenses
Gross income (Gross loss)
TradingAccount
Question Answer
Financial
Statemen
1. How well did the
company perform
(or operate) during
the period?
Gross Profit
Indirect Expenses
Net income (Net loss)
Profit and
Loss
Account
Information Reported on the Financial
-
7/29/2019 Mr Ranjit Singh Ppt
73/77
73
Information Reported on the Financial
Statements
3. What is the companysfinancial position at the
end of the period?
Assets= Liabilities
+ Owners equity
Balancesheet
Question Answer
Financial
Statement
4. How much cash did
the company generateand spend during
the period?
Operating cash flows
Investing cash flows Financing cash flows
Increase or decrease in cash
Statement
ofcash
flows
-
7/29/2019 Mr Ranjit Singh Ppt
74/77
74
Income Statement
The income statement,reports the companys revenues,
expenses, and net incomeor net loss for the period.
Introduction to the
-
7/29/2019 Mr Ranjit Singh Ppt
75/77
75
Introduction to the
Income Statement
The income statementis a financialtool that provides information about
a companys past performance.
-
7/29/2019 Mr Ranjit Singh Ppt
76/77
76
The Income Statement
Revenues
Expenses
= Net income(or Net loss)
-
7/29/2019 Mr Ranjit Singh Ppt
77/77