SUBBU PULLELA

Accounting is a language of business, it helps

to communicate the business transactions to

the users.

The main objective of any business is to make

profit.

Profit is difference between the price at which

the trader purchases goods and sells the same.

SUBBU PULLELA

Need of Accounting :

• To know the true profit or loss of the business for a particular period.

• To have a permanent record for all mercantile transactions taken placein the business.

• To know the financial position of the business at any point of time.• To know the amounts due to suppliers from whom the goods bought

on credit.• To know the amounts due from customers to whom the goods are sold

on credit.• To keep all changes in the values Assets and Liabilities on any date.• To know whether the line of business is profitable or not, if not, reasons

for the same.• To keep watch on expenses with a view to minimize the same.• To provide relevant information for Legal and Tax purpose when

required.

SUBBU PULLELA

ACCOUNTING DEFINITION

Accounting has been defined as

“The art of recording, classifying and summarizing in a significant manner andin Terms of money transactions and events which are of financial character andinterpreting the results”.

Analysis of Definition:

Recording - This is first stage of accounting which is deals with recording i.e. journalizingthe transactions.

Classifying - The second stage of accounting is classifying the transactions into Expenditure,Income, Assets and Liabilities. After classifying the transactions the journalized entries willbe posted to the respective ledger accounts.

Summarizing -The third stage of accounting is summarizing the data into trail balance forpreparation of financial statements.

Interpreting -The last stage of accounting is interpreting the result to the users like government,creditors, debtors, employees etc…

SUBBU PULLELA

Types of Accounts

Personal Account Deals with persons ( Artificial / Natural)

Real Account Deals with properties

Nominal Accounts Deals with Expenditure, Losses, Incomes angains

Golden Rules of Accounts

Personal AccountDebit the receiver

Credit the giver

Real AccountDebit what comes in

Credit what goes out

Nominal AccountDebit all expenses and losses

Credit all incomes and gains

SUBBU PULLELA