Accounting For Managers

1. Accounting For Managers Prepared by Dhanya.K.A

2. INTRODUCTION TO ACCOUNTING

3. Accounting • Meaning • Definition AICPA- “the art of recording ,classifying and summarizing in a significant manner and in terms of money transactions or events which are ,in part at least, of a financial character, and interpreting the results thereof”

4. Accounting process Transaction Business documents Journal Ledger P&L account Trial Balance (unadjusted & adjusted Balance Sheet

5. USERS • Shareholders, security analyst, investors • Lenders • Suppliers/Creditors • Customers • Employees • Government and regulatory agencies • Research

6. Generally accepted accounting principles • Meaning of GAAP • Conventions and concepts Materiality concept Money measurement cost concept Time period concept Conservatism concept

7. Consistency concept • Business equity concept • Going concern concept • Duality concept • Accounting period concept • Realization concept • Matching concept

8. Double entry system • Concept of capital and income • True and fair view of accounts

9. ACCOUNTING STANDARDS

10. IASC in 1973 Objective- Formulating ,publishing & promoting the use of accounting stds Harmonization of procedures No of accounting std issued ASB in 1977 Objective- Frame accounting stds No of accounting std issued Procedure International Vs Indian Accounting standards

11. Importance • Ideal practice of accounting • Uniformity in presentation • Comparability of accounts • Clear position of state of affairs • Auditors duties • Accounting standards issued • US GAAP

12. ACCOUNTING MECHANICS

13. Basic Accounting Mechanics • Double entry system • Duality concept • Accounting equation owner’s equity+ outside liability= Assets ( Sources of funds = Uses of funds) • Symbols for sources and uses

14. Nature of Debit and Credit DEBIT CREDIT Outflow Debtors Inflow of Resources Creditors income liabilities Expenses Assets

15. Types of Accounts • Personal accounts - natural person - Representative • Real accounts - Tangible - Intangible • Nominal accounts - expenses/income - losses/ gains

16. Rules of debit and credit Personal Accounts Real Accounts Nominal Accounts Debit Credit Debit Credit Debit Credit All Expenses & Losses All Incomes & Gains The receiver The giver What Comes in What Goes out

17. Books of accounts • Cash book • Journal • Ledger • A conceptual framework of accounting

18. Subsidiary books • Purchases book - Credit purchase of goods only

19. Purchases Returns Book

20. Sales Book - sale of goods on credit

21. Sales Returns Book

22. Bills receivable book - Date - From whom received - Acceptor - Date of bill - Term - Date of maturity - Where payable - Amount - How disposed

23. Bills payable Book - Date - Name of Drawer - Payee - Date of bill - Term - Date of maturity - Where payable - Amount

24. Journal proper • Entries which cannot be included in any other subsidiary books Eg: Sale or purchase of fixed assets adjustment entries rectification entries

25. Bank reconciliation statement • Ensure the accuracy of transactions appearing in the bank columns of cash book • Cash book and pass book • Bank statement

26. Reasons for difference between bank balance as per cash book and pass book • Cheques issued but not presented • Cheques received but not collected • Deposits directly made by customers • Collection charges, service charges and interest on OD charged by bank • Interest credited or any other amount collected directly by bank • Dishonor of cheques, wrong entries or omissions of entries

27. Advantages of BRS • Error detection • Delay in collection revealed • Completion of cash book • Chances of embezzlements are reduced

28. Steps in preparation of BRS • Take the cash book or passbook balance as starting point i. Dr.balance as per cash book - favorable balance ii.Cr.balance as per cash book –Overdraft/ Unfavorable balance iii. Dr. balance as per pass book- Overdraft/ Unfavorable balance iv.Cr.balance as per pass book– favorable balance

29. Continue… • If starting point denotes a favorable balance take it as a positive figure • If starting point denotes unfavorable balance take it as a negative figure • Add or deduct the discrepancies from starting point as per information • After adjusting all errors the balance as per other book is obtained