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Accountancy and the use of accountancy in daily life
Transcript of Accountancy and the use of accountancy in daily life
What is meant by accountancy ?
Limitiatons of accounting
Importance of accounting inforamtion in daily life
Accountancy and importance in daily life
Presented by the students of XI-D
Objectives of accounting
1)Recording business transactions systematically:−
It is necessary to maintain systematic records of every business transaction, as it is beyond human capacities to remember such large number of transactions. Skipping the record of any one of the transactions may lead to erroneous and faulty results.
Accounting is the process of collecting,recording,classifying,summarizing and communicating financial information to its users
Determining profit earned or loss incurred− In order to determine the net result at the end of an accounting period, we need to calculate profit or loss. For this purpose trading and profit and loss account are prepared. It gives information regarding how much of goods have been purchased and sold, expenses incurred and amount earned during a year.
3)Ascertaining financial position of the firm− Ascertaining profit earned or loss incurred is not enough; proprietor also interested in knowing the financial position of his/her firm, i.e. the value of the assets, amount of liabilities owed, net increase or decrease in his/her capital.
4)Assisting management− Systematic accounting helps the management in effective decision making, efficient control on cash management policies, preparing budget and forecasting, etc.
5)Assessing the progress of the business− Accounting helps in assessing the progress of business from year to year, as accounting facilitates the comparison both inter-firm as well as intra-firm
Advantages of accounting
1)Financial information about business:-
financial performance during the accounting period and also the financial position at the end of the accounting period
2)Assistance to management:-the management makes business plans,takes decisions and exercise control over the affairs on the basis of the accounting information.
3)Replaces Memory:-A systematic and timely recording of transactions obviates the necessity to remember the transactions
4)Facilitates Comparative Study:-A systematic record enables a businessman to compare one year's result with those of other years and locate significance factors leading to the change,if any
5)facilitates settlement of tax liabilities:-A systematic accounting record immensely helps in settlement of income tax,sales tax,VAT and excise duty liabilities,since it is a good evidence of correctness of transactions.
Facilities Loans:-Loan is granted by the banks and financial institutions on the basis of growth potential which i supported by the performance.Accounting makes available the information with respect to performance.
Evidence in Courts:-Systematic record of transactions is often accepted by the courts as good evidence.
Facilitates Sale of business:-if someone desires to sell his business ,the accounts maintained by him will enable him the ascertainment of the proper purchase price.
1)Accounting is not fully exact
2)Accounting does not Indicate the Realizable Value
Accounting ignores the qualitative Elements
Accounting Ignores the effect
Accounting may lead to Window Dressing
Internal users are :-
3)Employees and workers
1)Banks and financial Institutions
2)Investors and Potential Investors
4)Government and its authorities
Basic terms in accounting
It is the amount withdrawn or goods taken by the proprietor or partner for personal use.
it means the amount owed(payable) by the business.Liability towards the owners of the business is known as internal liability.
It means a financial transaction or event entered by the two parties and is recorded in the books of accounts.
It is the amount invested by the proprietor or partner in the business.It may be in the form of money or assets having a monetary value
An asset is an property or legal rights owned by the business to which money value can be attached.It will enable the firm to get cash or an economic benefit in the future
A creditor is a party (e.g. person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed.
A person who owes a creditor; someone who has the obligation of paying a debt
To understand what is accountancy
to know how it functions
to understand the importance of accountancy in daily life