ACCOUNTING SYSTEM Accounting theory ACCOUNTING AN ECONOMIC DEVELOPMENT ACCUSER OF ACCOUNTING INFORMATION OUTING AS AN A INFORMATION SYSTEM FACTORES INFLUENCING ACCOUNTING ENVIRONMENT

ACCOUNTING STANDERDS ACCOUNTING PRINCIPLE GAP CONVENTION AND CONCEPTS ADVANCE TREATMENT IN FINAL ACCOUNT

Definition of Accounting Accounting is the art of recording, classifying and summarizing in a in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial characters and interpreting the results thereof.

Accounting as an information system The term system may be defined set of elements which operate together in order to attain a goal. A system does not consist of random sets of elements But, element which may be identified as belonging together because of a common goal. A system contains 1.input 2. 3.output A business organization is regarded as an open system which has a dynamic interplay with it’s environment from which it draws resources and to which it consigns it’s product an services. Accounting as an information system

Uses of Accounting information Management or manager Users with direct financial interest Users with indirect financial interest Accounting provides information about the activity of an entity to various individuals or a groups for their use in making informed judgments and decisions. The user of accounting information can be broadly divided into three categories

Factors influencing financial environment Economic and Social factors Legal and statutory requirement Accounting profession and institution structure Corporate financing system.

Accounting and economic development Capital although scarce, is needed for the economy development of a country. An efficient capital market helps the investors and capital provides in getting information about investment opportunity. The following are the consequence emerge The individual investors is reduced to financing his or her project out of their proper savings. The individual investors may shun risky investment and investment with long term pay of There is a lack of communication between the manager and the share holders leading the potential investors to be unsure of the price to pay and of quality of the security. The security price is the composed into fundamental value and noise.

GAAP convention The Phrase “Generally Accepted Accounting Principle” is a technical accounting term that encompasses the convention rules and procedures necessary to defined accepted accounting practices at a particular point in time. Accounting principle board of USA states “GAAP incorporate the consensus at a particular time as to which economic resources and obligations should be recorded as assets and liabilities by financial accounting.

Accounting principles GAAP are primarily relevant to financial accounting. The consideration which guide the selection of accounting principles for financial reporting purposes as follows Accurate presentation Conservatism Profit maximization Income smoothing

2. Revenue recognition and measurement Definition of Revenue Revenue result from the sale of goods and the rendering of services and is measure bye the charge made to customers, clients and tenants for goods and services furnishes to them to it also include gains from the sale or exchange of assets interest and dividends eran on investment.

REVENUE RECOGNISATION AND MEASUREMENT Revenue is measured in terms of the value of the products or services exchanged and is the amount that customers are reasonably certain to pay. In order to determine the amount likely to be paid by customers and to be recognized as revenue , some adjustments shall be made in the gross sales value of the goods and services sold.

Following are the measurement of revenue recognized:- 1 Following are the measurement of revenue recognized:- 1.Discounts: Discounts may be generally of two types-trade discount and cash discount. Trade discounts are used in determining the invoice prices, actual selling price from published catalogs or list price, say list price less 30 percent.

2.Sale returns and allowances: some times the purchase return a part of goods purchased to the seller if they are dissatisfied with the goods. It should be noted that sales returns and allowances deducted from the gross sales of a period may not relate totally to the actual sales of that period.

3.Bad Debts: Some customers usually do not make payments and the firm incurs a bad debt expenses. Bad debts are expenses is classified as a selling expense on the profit and loss account. 4.Revenue measurement in non-cash Transactions: If a sale involves a non-cash transactions or non cash assets, such as the trade in of an old car for a new car ect.

REVENUE RECOGNITION CRITERIA It is generally accepted that revenue is earned through out all stages of the operating cycle. Following are criteria for revenue recognition:- 1.Revenue recognzed at the point of sale. 2.Revenue recognition in sale of services. 3.Revenue recognition in constructionwork

AS-9 ON DISCLOSURE RELATING TO REVENUE RECOGNITION 1.Revenue from sales or service transactions should be recognized when the requirements as to performance set out in points 2 n 3 below are satisfied, provided that the time of performance. 2.In a transaction involving the sale of goods, performance should be regarded as being achieved when the following conditions have been fulfilled. 3.Revenue arising from the use by other of enterprises resources yielding interest, royalties and dividends should only be recognized when no significant uncertainty as to measurability exists.