ACCOUNTING?

Accounting is a language of business.

The affairs and the results of the
business are communicated to others
through accounting information, which
has to be systematically recorded and
presented

HOW ACCOUNTING
HELPS YOU?
Help you prepare a budget and keep on
target.
Realize how much cash you have and if
there is enough to pay bills.
Uncover places where costs can be cut.

TYPES OF ACCOUNTING
Financial accounting
Managerial accounting

FINANCIAL ACCOUNTING
Branch of accounting associated
with preparing reports for external
users
i.e. the bank, shareholders

MANAGERIAL
ACCOUNTING
Accounting to guide management in
making decisions about the business
i.e. break even analysis

CLASSIFICATION OF
ACCOUNTS
ACCOUNTS
PERSONAL
ACCOUNTS

REAL
ACCOUNTS

IMPERSONAL
ACCOUNTS

NOMINAL
ACCOUNTS

PERSONAL ACCOUNTS
Accounts in the name of persons are known
as personal accounts.
Eg: Babu A/C,
Babu & Co. A/C,
Outstanding Salaries A/C, etc.

REAL ACCOUNTS
These are accounts of assets or properties. Assets
may be tangible or intangible. Real accounts are
impersonal which are tangible or intangible in
nature.
Eg:- Cash a/c, Building a/c, etc are Real
Accounts related to things which we can feel, see
and touch.
Goodwill a/c, Patent a/c, etc Real Accounts
which are of intangible in nature.

NOMINAL ACCOUNTS
These accounts are impersonal, but invisible and
intangible. Nominal accounts are related to those
things which we can feel, but can not see and
touch. All expenses and losses and all incomes
and gains fall in this category.
Eg:- Salaries A/C, Rent A/C, Wages A/C, Interest
Received A/C, Commission Received A/C,
Discount A/C, etc.

FINANCIAL
STATEMENTS
The Balance Sheet
The Income Statement
Statement of Cash Flows

THE BALANCE SHEET

The balance sheet is an accountants
snapshot of the firms accounting value on a
particular date, as though the firm stood
momentary still.
The balance sheet states what the firm owns
and how it is financed.
Assets

Liabilities + Stockholders equity

THE INCOME
STATEMENT
The income statement measures performance
over a specific period of time, say, a year.
The accounting definition of income is:
Revenue Expenses is Income

STATEMENT OF CASH
FLOWS
Uses of
Funds

Sources of
Funds

Assets

Assets

Liabilities and
Stockholders Equity

Liabilities and
Stockholders Equity

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