accounting information for decision making

8/8/2019 Accounting Information for Decision Making .

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Learning Facilitator

Dr. A.K.Mishra

Day 1 Theme:

Understanding the Accounting Language


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ACCOUNTING:INFORMATIONFOR

DECISIONMAKING


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Contents To Be Covered

Definition of Financial Accounting

Accounting Process

Users and their purposes

Functions

Relevant Concepts

Types of Accounts

Rules ofDebit CreditJournal, its types and formats


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DEFINITION OF ACCOUNTING

Accountingisthe processof

identifying,

measuring andCommunicating

economicinformationto permit

informed judgements anddecisions byusersofthe information.


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Identifies

Record

s

CommunicatesRelevant

Reliable

Comparable

Accounting Process

Accountingis a

system that

information

that is

to help users make

betterdecisions.


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FUNCTIONS

Function

Recording

ClassifyingSummarizing

Reporting

Mechanism

Journal

LedgerTrial Balance

Financial Statements


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USERS AND PURPOSES

User

Managers

Investors

Lenders

Government

Purpose

To assess

Performance

To assess risk andReturns

To assess repaying

capacity and its

financial viabilityProtect the interest of

public


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Information

Users

Investors

CreditorsManagers

Owners

Customers

Employees

Regulators

-SEBI-CBDT

Decisions

Supported

Performance

evaluationsStock

investments

Tax strategies

Labor relations

Resource

allocationsLending

decisions

Borrowing

Information System

Financial

Information

Provided

Profitability

Financial

position

Cash flows


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Objectives ofExternal FinancialReporting

The primaryfinancial

statements.

Income Statement

Balance Sheet

Statement of Cash Flows


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RELEVANT CONCEPTS

The Entity Concept

The Going Concern Concept

The Money Measurement ConceptThe Accounting Period Concept


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Types of Accounts

Name

Personal Accounts

Real Accounts

Nominal Accounts

Nature

Accounts of individual

Represents assets

Relates to expenses or

losses and income or

profits


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Rules ofDebit & Credit

Personal

Accounts

Real

Accounts

Nominal

Accounts

Debit The

Receiver

What comes

in

All

expenses &

losses

Credit The Giver What goesout

All incomes& gains


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JOURNAL

It is the book of first entry for all the transactions.

Following subsidiary books constitute Journal:

Journal Proper/General Journal

Purchase Book

Purchase Returns Book

Sales BookSales Returns Book

Cash Book


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Journal Proper/General Journal

Date Particulars Ledger

Folio

No.

Debit

(Amount)

Credit

(Amount)


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Purchase Book

Date Name of

Supplier

Ledger

Folio

Inward

Invoice

No.

Amount


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Purchase Returns Book

Date Name of

Supplier

Ledger

Folio

Debit

Note No.

Amount


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Sales Book

Date Name of

Customer

Ledger

Folio

Outward

Invoice

No.

Amount


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Sales Returns Book

Date Name of

Customer

Ledger

Folio

Credit

Note No.

Amount


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CASH BOOK

Date Particul

ars

L.F. Am. Date Particula

rs

L.F. Am.


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End of Session

accounting information for decision making

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