Introduction to Financial Accounting

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Introduction to financial accounting. This presentation will help students to understand financial accounting in simple way , it covers basics of financial accounting process

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Introduction to financial accounting By. Dr. Sanjay P Sawant Dessai Associate Professor VVMs Shree Damodar College of Commerce and Economics Margao Goa sanjaydessai@gmail.com 6/15/2013 sanjaydessai@gmail.com 1

What is Accounting:

What is Accounting Accounting is ---Reporting Reporting through ---Financial Statements Financial statements are Profit and loss Account / Income statement Balance Sheet Cash Flow Statement 6/15/2013 sanjaydessai@gmail.com 2

Financial Accounting :

Financial Accounting Definition American Institute of certified public Accountant defines accounting as “Accounting is an art of recording, classifying and summarizing in a significant manner and in terms of money, transaction and events which are, in part at least, of a financial character and interpreting the results thereof ” 6/15/2013 sanjaydessai@gmail.com 3

Accounting :

Accounting Art Record Transaction/Event Monetary terms (money) Financial Character Classification Summary & Interpretation of results 6/15/2013 sanjaydessai@gmail.com 4

Items disclosed in financial statements:

Items disclosed in financial statements Assets Liabilities Incomes / Gains Expenses / Losses Equity (Capital) (Personal, Real and Nominal Accounts ) 6/15/2013 sanjaydessai@gmail.com 5

Types of Accounts :

Types of Accounts Personal Accounts - Assets and liabilities Real Accounts – Assets Nominal Accounts - Incomes and expenses 6/15/2013 sanjaydessai@gmail.com 6

Process of Accounting (Preparation of financial statements) :

Process of Accounting (Preparation of financial statements) Transaction / event Documentary evidence / Voucher Journal /Subsidiary books Ledger Balancing / Totaling Trial balance Financial statements 6/15/2013 sanjaydessai@gmail.com 7

Journal /Subsidiary books- Primary Books :

Journal /Subsidiary books- Primary Books Purchase Book Sales Book Purchase Return Sales Return Cash book Bills Receivable Book Bills Payable Book Journal Proper 6/15/2013 sanjaydessai@gmail.com 8

Reporting financial information on following :

Reporting financial information on following Sales Purchases Expenses Incomes Profits Losses Capital Liabilities Assets Reserves Loans and advances Investment Debtors Creditors 6/15/2013 sanjaydessai@gmail.com 9

Parties interested in financial information:

Parties interested in financial information Owners /Investors Management Potential investors Suppliers and other creditors Lenders (banks a Employees Government and other agencies Public Customers 6/15/2013 sanjaydessai@gmail.com 10

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