3Introduction to Final Final Accounts Finance means Cash, Money, Price, Value and CostIts relating to Monetary benefitBasically 3 Concepts
4Introduction to Final Final Accounts Account – It’s a summarized statement of Debit and CreditAccounting – it’s a process of all types of accounts such as PA, RA & NAAccountancy – its law of accounts.
5Introduction to Accounting Accounting is a old concept. It was introduced by Edward Jones in 1795 in the books of “Modern Accounting System”.Accounting is “Method of Identifying, Classifying, Summarizing in a significant manner in terms of Money”.
6Principles of Accounting RecordingIdentifyingClassifyingSummarizingBalancingEg. 1. Mr. Ramu Purchased a book of Rs. 150/- from kiran at Koti.2. Mrs. Aishwarya Sold a Machinery of Rs /- to Bharati by cash.
7Types of Financial Accounting Personal AccountsReal AccountsNominal Accounts
8Types of Accounting Financial Accounting Management Accounting Cost Accounting
9Concepts of Accounting Money Measurement conceptBusiness Entity conceptGoing concern conceptCost conceptDual aspect conceptAccounting period conceptMatching conceptReliasation conceptObjective conceptOther concepts
10Conventions of Accounting Convention of DiscloseConvention of ConsistencyConvention of ConservatismConvention of Materiality
11Principles of Double Entry system Personal AccountsReal AccountsNominal AccountsDebitCreditDebitCreditDebitCreditReceiverGiverWhat comes inWhat goes outExp and LossIncome & Gain
12JournalWhen the size of the business firm is big. All the business transections are first recorded in a Rough Book, before entering them in “JOURNAL”.After words these transactions are recorded in a chronological order.After analyzing, classifying these benefits according to the principles of debit & Credit is called “Journal”.
13Advantages of Accounting Replacing moneyAssisting the performance of the businessAssessing the financial status of the businessDocumentary evidenceAssisting in realisation of debts.Facilitating & detecting fraudsPreventing & detecting fraudsHelp full to Management
14Classification of Ledger Debtors ledgerCreditors ledgerGeneral ledgerSelf ledger
16Characteristics of Cash book It can also be treated as a subsidiary bookLike ledger, there are the debit and credit columns in cash bookOnly cash transactions are recordedIt always shows debit balance but it never shows the credit balanceThe balance of cas can be known at any point of time
17Types of cash transactions Cash ReceiptsCash Payments
18Types of Cash books Simple cash book Double column cash book Triple column cash bookPetty cash book
19Trial BalanceM.S gosav defined the Trail Balance as “The Trail balance is a statement containing the balances of all ledger accounts., as at any given date, arranged in the form of debit and credit columns placed side by side and prepared with the object of checking the arithmetical accuracy of the ledger postings”.
20Characteristics of Trial Balance Basically Trial Balance is a statement or listIt contains all the Debit and Credit balancesIt total debit balances must be equal in aggregate to the total of the credit balances when accounts are balanced at any given time.Trial Balance is the only base for the preparation of final accounts
21Advantages of Trial balance Preparation of final accounts will become easy with the preparation of Trail balanceWhen the total balance of debit is equal to the total balance of credit in a trial balance one can confidently rely on the results derived out of such trail balance.
22Final Accounts Relating to Trading Concern Trading Account Profit & Loss AccountBalance sheetRelating to Manufacturing FirmManufacturing AccountBalance Sheet
23Importance of Trading Account We can ascertain Gross Profit / Gross LossWe can observe the changes in direct expenses.We can calculate the cost of productionWe can establish the relation b/w the costs and revenuesWe can analyze the trend in salesWe can decide the earning capacity of the firm
24Importance of Profit & Loss Account The main purpose of preparing the Profit & Loss account is to ascertain Net profit / Net Loss of the firmIt is also useful to establish a relationship b/w the sales and the total indirect expenses through percentages.Its relating to the expenses and Incomes of the firm
25Balance Sheet“Balance Sheet is a statement prepared on a particular date of reflect the financial position of the firm with all assets and liabilities of the firm”.
26Types of Balance Sheet Rigidity preference order Liquidity preference order