Basic Financial Accounting Concepts
Meaning of Accounting: According to American Accounting Association Accounting is the process of identifying, measuring and communicating information to permit judgment and decisions by the users of accounts.
Users of Accounts: Generally 2 types.
1. Internal management.
2. External users or Outsiders- Investors, Employees, Lenders, Customers, Government and other agencies,Public.
Subfields of Accounting:
Book-keeping: It covers procedural aspects of accounting work and embraces record keeping function.
Financial accounting: It covers the preparation and interpretation of financial statements.
Management accounting: It covers the generation of accounting information for management decisions.
Concept, Features And Objectives Of Financial Statements
Concept Of Financial Statements
Past events and performances serve as background for making projections if they are to be realistic.The financial statements provide important information concerning past financial transactions and their effects on the profitability and the financial position of the business.
Various users of financial statements such as owners , investors , creditors , management etc. must make an analysis of financial statements to make the right decision. Therefore financial statements are the means of conveying to owners , management or to interested outsiders a concise picture of profitability and financial position of the business.
Financial statements are the end products of the accounting process which gives a concise accounting information of the period after the accounting period is over. READ MORE...
INTRODUCTION & COMPARATIVE ANALYSIS BETWEEN OLD SCHEDULE VI AND REVISED SCHEDULE VI
• The revised schedule contains General Instructions, Part I – Form of Balance Sheet; General Instructions for Preparation of Balance Sheet, Part II – Form of Statement of Profit and Loss; General Instructions for Preparation of Statement of Profit and Loss.
• The Revised Schedule VI has eliminated the concept of ‘schedule’ and such information is now to be furnished in the notes to the accounts.
• The revised schedule gives prominence to Accounting Standards (AS) i.e. in case of any conflict between the AS and the Schedule, AS shall prevail.
• The revised schedule prescribes a vertical format for presentation of balance sheet therefore, no option to prepare the financial statement in horizontal format. It ensures application of uniform format.
• All Assets and liabilities classified into current and non-current and presented separately on the face of the Balance Sheet.
• Number of shares held by each shareholder holding more than 5% shares now needs to be disclosed.
• Details pertaining to aggregate number and class of shares allotted for consideration other than cash, bonus shares and shares bought back will need to be disclosed only for a period of five years immediately preceding the Balance Sheet date.
• Any debit balance in the Statement of Profit and Loss will be disclosed under the head “Reserves and surplus.” Earlier, any debit balance in Profit and Loss Account carried forward after deduction from uncommitted reserves was required to be shown as the last item on the asset side of the Balance Sheet. READ MORE…
Accounting Concepts Notes
As we know that accounting is the language of business, which communicates the position of a business houses to the outside world. In order to make this language easy and commonly understandable by all, it is necessary that it should be based on certain uniform doctrine and standards are known as accounting principles.
Thus, accounting principles may be defined as those rules doctrine and standard which are followed by all the accountants universally at the time of recording business transactions and events.
1. Separate Entity Concept or Business Entity Concept: READ MORE.....