FINANCIAL ACCOUNTING - PART 01

 

VIDEO LINK

 

 FINANCIAL ACCOUNTING

PART 01

 

PREPARATION OF FINANCIAL STATEMENTS

 

=======================

 

Accounting is the process of recording financial transactions pertaining to a business

 

Accounting has been called the "language of business“ 

 

Practitioners of accounting are known as Accountants. 

 

Father of Accounting : Luca Pacioli

 

 

 

Basic Terms In Accounting

• Business Transactions 

- Dealing or an event which has an impact on business 

 

- Internal or External 

 

- Cash, Credit or barter

• Capital 

- Investment made by the owner in the business

• Drawings 

- Withdrawal for personal purpose

 

• Liabilities 

- The obligations which a business owes to others. 

 

- Short term liabilities (Less than 1 year) 

 

- Long term liabilities (More than 1 year) 

 

- Contingent liabilities

• Assets 

- Assets are things of value owned by the business 

 

- Fixed Assets and Current Assets 

 

- Tangible Assets: These are assets having definite shape and physical existence. 

 

- Intangible Assets: Assets having no physical existence 

 

- Fictitious Assets: These have no real value but are shown in the books of accounts only for technical reason

 

• Income 

- Increase in the net worth

• Losses 

- Excess of expense over revenue

• Gains/Profit 

- Excess of revenue over expense

• Purchase

- The amount of goods purchased by a business both for cash and credit and are meant for sale.

 

• Sales 

- It is the revenue or income earned by a business through the sale of goods and services

• Stock 

- The goods available with business for sale on a particular date

• Debtors 

- A person who owes money to the business

• Account receivable 

- Amount due by the debtor and amount of bills receivable

 

• Creditors 

- A creditor is a person to whom the business owes

 

• Accounts payable 

- Total of creditors and bills payable

• Prepaid Expenses 

- Expenses paid in advance.

• Accrued Income 

- Income due but not received. 

 

 

Branches of Accounting 

 

In order to satisfy the needs of the different people interested in accounting information, various branches of accounting have developed. They are:
 

1.Financial Accounting: 

It is the original form of accounting. The purpose of this form of accounting is to record transactions in the books of accounts and to prepare the financial statements and interpreting the results.
 

2.Cost Accounting: 

This branch of accounting deals with the process of ascertainment of cost with the help of this system, the cost of product or services can be ascertained and controlled.

 

3. Management Accounting:
It is concerned with the use of financial and cost accounting information to managers for making business decisions 

 

==============================