Function of management accounting ppt

accounting and finance department responsibilities and accounting for assets and liabilities pdf
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Dr.DinoHardy,United Arab Emirates,Teacher
Published Date:25-07-2017
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What is a River ? River is a flow of water. What is Accounts ? At one level , it can be said as tracking the flow of money through a business. It starts with what is called a Transaction . Transaction is an exchange. Example : You go to a shop and buy a pen . The money is exchanged for a pen. Example : You go to a doctor .The money is exchanged for service. Based on the above understanding can you make some rules for a transaction ? 1. Transaction must have two sides . This is called Dual Aspect. That’s why we called accounts as double entry book-keeping.It was invented by Lucio Paciolio. 2. Second rule for a transaction is , it has to be in terms of money . This is the famous Money measurement concept. The flip side is if any transaction cannot be measured in terms of money , it cannot be recorded in the books of accounts. A Transaction is one-off. Example : Rent paid for the month , Purchase of goods. An event is a result of number of transactions and it has to appear in Balance Sheet . Example : Profit for the year Closing stock – It is the result of number of purchases and sales. Entire Balance Sheet : It is as a final result of the entire year’s operation. Transactions are recorded in journal. Journal is a book of original entry. It is known as secondary book. It consist of five columns. From Journal , the transactions are posted in the Ledger. All entries in journal are posted in Ledger. Ledger is known as principal book. It consist of 8 columns. From Ledger , the balances are extracted to Trial Balance. Trial balance is a statement. It shows arithmetic accuracy. 1 - Real A/c 2 - Nominal A/c 3 - Personal A/c 4 - Representative Personal A/c Real A/c Nominal A/c Personal A/c Land Salary Capital Building Wages Drawings Plant and Sales Bank Machinery Discount Debtors Cash Creditors Real A/c  Debit what comes in  Credit what goes out Nominal A/c  Debit all expenses and losses  Credit all incomes and gains Personal A/c  Debit the receiver  Credit the giver The fourth type of account is Representative personal A/c . All unpaid expenses / prepaid expenses It will appear in the liabilities side of the Balance Sheet. Example : outstanding salary , prepaid rent. From Trial balance Nominal A/c are closed and transferred to Trading and Profit & Loss A/c. Real and Personal A/c are not closed and not balanced and entered in the Balance Sheet. The preparation of Trading , P& L and Balance Sheet is called Final A/c Final A/c is the last step for the accounting process. In Big companies Final A/c are published as Annual Reports (Financial Statements) The total set consist of Trading , Profit & Loss , Balance Sheet , Cash flow & Notes to accounts. Transaction Final Journal Accounts Trading Ledger A/c Balance P&L A/c Sheet Trial Balance Accounting ,Chapter1 - Unit – 1 CA.S.S.Prathap DEFINITION Accounting is the art of Recording , Classifying and Summarising in a significant manner in terms of money , Transaction and Event which are in part at least of a financial character and interpreting the results thereof. Committee of Terminology of AICPA PROCEDURAL ASPECTS OF ACCOUNTING Procedure of Accounting Generating financial Using the financial information information Recording Analyse Classifying Interpret Summarizing Communicate OBJECTIVES OF ACCOUNTING  Systematic record of transactions. (i.e.,) Book-keeping  Ascertainment of results (i.e.,) Trading , Profit & Loss A/c  Ascertainment of financial position (i.e.,) Balance Sheet  Providing information to users. (i.e.,) Financial Reports  To know the solvency position. (i.e.,) Liquidity

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