1. Additional Material-Lecture 2
MGT-101
Financial Accounting
Additional Material-Lecture 2

2. What is a transaction? Transaction: Financial activity or event
two parties
Exchange of some goods or services
For cash/ money or a promise of future payment

3. Features of transaction
Between two parties
Measurable in terms of money
Transfer of property or service
Affects the financial position of a business

4. What is BOOK KEEPING? Presentation Title Presentation Title
Part of accounting
Systematic recording financial transactions OR
Art of recording business transactions in the books of accounts in systematic manner
Presentation Title
Presentation Title

5. OBJECTIVES OF BOOK-KEEPING
Provides financial data to management
Provides a systematic record
Keeps permanent record
Provides details of each transaction
Reflects the financial performance of a business.

6. OBJECTIVES OF ACCOUNTING
Primary:
Maintenance of records
Profit or loss calculation
Financial position reflection
Provide information to its users

7. Cont… 2. Secondary: Tax calculation & payment
Provides evidence to prevent disputes
Extracts correct & valid information
Verification and counter check of cash
Helps in future planning

8. USERS OF ACCOUNTING INFORMATION
Internal Users
External Users
Owners
Labor unions
Managers
Financial analysis
Employees
Stock Exchange
Supplier
Regulatory authorities
Customers
Financial press/media
Trade associations
Tax Authority
Creditor/ investors

9. BOOK KEEPING VS. ACCOUNTING
Nature and scope of work
Recording phase of an accounting system & basis of accounting
Summarizing phase of an accounting system & basis of business decisions.
Skill
Does not require any special skill or knowledge
Requires special skill and knowledge and personal judgment
Financial Statement
Not prepared from book keeping record.
Prepared from accounting record.
Financial conditions
Cannot give the complete and clear picture of the financial condition of business.
Shows complete and clear picture of the financial condition of business.
Legality
Cannot help in complying with legal formalities.
can be complied with the help of accounting information
Managerial decisions
Does not help in managerial decisions
Helps in making managerial decisions.

10. SINGLE ENTRY VS. DOUBLE ENTRY
incomplete records (cash transactions only)
complete records (cash & Credit transactions)
statement of profit and loss in prepared to calculate profit
trading and profit & loss is prepared in order to ascertained the profit & Loss of business.
statement of affairs is maintained
balance sheet is prepared.
Two aspects of a transaction is not recorded
two fold aspects of each and every transaction is recorded.
adopted by small scale business.
adopted by large scale business.
Presentation Title
Presentation Title

11. DISADVANTAGES of Single entry book keeping
Frauds and mistakes are difficult to detect
Partial and incomplete records are maintained
Balance sheet is not possible to prepare
Nominal accounts & profit and loss account cannot be prepared.
Accurate trial balance cannot be drawn

12. ADVANTAGES OF DOUBLE ENTRY SYSTEM
Balanced trial balance
Accurate net profit and loss
Accurate balance sheet
Less chances of fraud
Easy detection of errors, omissions & fraud
Helps in the valuations of business
Helps in managing & supervising business activities
Reflects true financial position of a business.

13. Thank You…
Presentation Title
Presentation Title