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BASIC CONCEPTS
OF FINANCIAL
ACCOUNTING
NAVEEN SHARMA
MBA(Mkt.)HSB
96608-39808
Financial accounting means gathers and summarizes financial data to prepare financial reports such as Balance sheet and income statement for the organisation’s management, investors, suppliers and other stakeholders.
Cycle Of Financial Accounting
The six – step of financial accounting1. Analyzing and categorizing documents.
2. Putting the information into journals.
3. Posting that information into ledgers.
(Note: These first three steps are continous. )
4. Preparing a trial balance.
5. Preparing an income statement and balance sheet.
6. Analyze the financial statements and determine financial health of company.
Journalize transactions
in the journal.
Post entries to the accounts in
the ledger.
Prepare unadjusted trial
balance.
Prepare an income statement & Balance - sheet
Analyze Business
Transactions.
Determine financial health of company
Accounting Cycle
JOURNAL Page 1
Date Particular Lf Debit Credit
Performa of Journal
Performa of Ledgers
Date Item Post. Ref. * Debit Date Item
Posting
Reference Credit
Account No:Account
Left-hand or Right-hand or
Debit Side Credit Side
Account Name Account No:
Two-Column Account
T-Account form that depicts the two-column account:
Performa of Trial Balance
Performa of Trading and P&L A/c
Performa of Balance - Sheet
Importance Of Financial Accounting
It can provide information.
It uses double – entry method.
It provides a clear and methodological approach into the activities of the business.
It is easier for small business to compare with others because its rules are common everywhere.
It helps to take better decision making.
Scope Of Financial Accounting To help managers evaluate the financial
condition.
The operating performance of the firm so they may make better decisions.
To report financial information to people outside the firm such as owners, suppliers, and the government.
Accounting is the measurement and report of financial information to various user regarding the economic activities of the firm.
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