What is M.B.A?

The Master of Business Administration (MBA) is an internationally-recognized degree designed

to develop the skills required for careers in business and management. The value of the MBA,
however, is not limited strictly to the business world. An MBA can also be useful for those
pursuing a managerial career in the public sector, government, private industry, and other areas.
The core courses in an MBA program cover various areas of business such as accounting,
finance, marketing, human resources and operations in a manner most relevant to
management analysis and strategy. Most programs also includeelective courses.

5 REASONS WHY YOU SHOULD DO AN MBA

 (14E00104) FINANCIAL ACCOUNTING FOR MANAGERS
Objectives
 To acquaint the students with the fundamentals principles of book keeping ,
accounting and management accounting
 To enable the students to prepare, analyze and interpret financial statements and
 To enable the students to take decisions using management accounting tools.

* Standard discounting and statistical tables to be allowed in the examinations.

1. Introduction to Accounting: Definition, Importance, Objectives, uses of accounting and
book keeping Vs. Accounting, Single entry and double entry systems, classification of accounts
– rules of debit & credit.
2. The Accounting Process: Overview, Books of Original Record; Journal and Subsidiary
books, ledger, Trial Balance, Final accounts: Trading accounts- Profit & loss accounts- Balance
sheets with adjustments, accounting principles.
3. Valuation of assets: Introduction to Depreciation-methods (Simple problems from Straight
line method, Diminishing balance method and Annuity method). Inventory Valuation: Methods
of inventory valuation (Simple problems from LIFO, FIFO, and Simple Average & Weighted
Average). Valuation of goodwill methods of valuation of goodwill.
4. Financial Analysis-I: Objectives of fund flow statement- steps in preparation of fund flow
statement, Objectives of cash flow statement- Preparation of cash flow statement - funds flow
statement Vs. cash flow statement
5. Financial Analysis -II Analysis and interpretation of financial statements from investor and
company point of view, Liquidity, leverage, solvency and profitability ratios – Du Pont Chart -A
Case study on Ratio Analysis, Preparation of Bank Reconciliation Statement.
Structure of syllabus:

Ch.: 1 Introduction to accounting

Financial accounting

Book keeping Accounting

Ch.: 2 recording financial transactions. I.e.

accounting process

Applying concepts and principle to financial

information (GAAP)

***Financial statement (The income statement and balance sheet) ***

Ch.: 3 further look of assets like tangible and intangible

Making sense of financial statement

Ch.: 4 fund flow and cash flow: past & future Ch.: 5 ratio analysis
 UNIT-I

Introduction to Accounting: Definition, Importance, Objectives, uses of accounting and book

keeping Vs. Accounting, Single entry and double entry systems, classification of accounts – rules
of debit & credit.

When you have read this chapter you will be able to:
i) To know the Definition and objective of Book- Keeping
ii) To study the objectives, functions, and importance Accounting
iii) To understand the methods of Accounting, kinds of Accounts and Accounting rules.
iv) To study the difference between Books- keeping and Accounting
v) To study the various branches of Accounting

1.1 INTRODUCTION
Every person performs some kind of economic activity. A worker daily works and get
wages and he spends to buy goods, cloths and some part of earnings saves for future. A business
man purchases goods and sales it and incurred various expenses like salaries, rent etc. A partner
in firm contributes towards capital in the firm which carries on business may be trading in goods.
Governments are also carries on some financial activities. All are carrying some kind of
economic activities. Such economic activities are performed through transactions and / or events.
Thus the business transactions include purchase, sale of goods, rendering various services,
receipts and payments for such transactions. In a business concerns the transactions are
numerous. The details of all transactions cannot be remembered by the business man. Therefore
it is necessary to keep written records of all such transactions. The records of written transaction
will help business to settle disputes and also possible to provide valuable information to the
owner of business.
“Accounting is as old as money itself”. Since in early ages all commercial activities
were based on barter system only, recording keeping was not a necessity. The Industrial
Revolution of 19th century along with rapid rise in population, paved way for the development
of commercial activities, mass production and credit terms. Thus recording of business
transaction has become an important feature. In recent years with the change of technologies and
marketing along with stiff competition, accounting system has undergone remarkable changes.

MEANING OF ACCOUNTING

Accounting, as an information system is the process of identifying, measuring and

communicating the economic information of an organization to its users who need the
information for decision making. It identifies transactions and events of a specific entity. A
transaction is an exchange in which each participant receives or sacrifices value (e.g. purchase
of raw material). An event i.e. results from the transactions (whether internal or external) is a
happening of consequence to an entity (e.g. use of raw material for production). An entity means
an economic unit that performs economic activities
DEFINITION

Accounting as “the process of identifying, measuring and communicating economic

information to permit informed judgments and decision by users of the information”.
American Accounting Association (AAA)
Accounting as “the art of recording, classifying, summarizing in a significantmanner
and in terms of money transactions and events, which are, in part at least, of afinancial
character and interpreting the results there off”.
American Institute of Certified Public Accountants (AICPA)

KEY SUMMARY OF DEFINITION

(1)Recording: Recording all the transactions in journal/subsidiary books for purpose of future
record or reference. It is referred to as "Journal."
(2) Classifying: All recorded transactions in subsidiary books are classified and posted to the
main book of accounts. It is known as "Ledger."
(3) Summarizing: All recorded transactions in main books will be summarized for the
preparation of Trail Balance, Profit and Loss Account and Balance Sheet.
(4) Interpreting: Interpreting refers to the explanation of the meaning and significance of the
result of final accounts and balance sheet so that parties concerned with business can determine
the future earnings, ability to pay interest, liquidity and profitability of a sound dividend policy.

FINANCIAL ACCOUNTING AND MANAGEMENT ACCOUNTING

Accounting information can be classified broadly between financial accounting and

management accounting.
Financial accounting is the day-to-day recording of an organization’s financial
transactions and the summarizing of those transactions to satisfy the information needs of the
user groups. It is sometimes referred to as meeting the external accounting needs of the
organization, and as such is subject to many rules and regulations (a regulatory framework)
imposed by company legislation and accounting standards.
Management accounting is sometimes referred to as meeting the internal accounting
needs of the organization, as it is designed to help managers with decision making and planning.
As such it often involves estimates and forecasts, and is not subject to the same regulatory
framework as financial accounting.

1.2 NEED AND IMPORTANCE OF ACCOUNTING

When a person starts a business or firm, whether large or small, his main aim is to earn
profit. He receives money from definite sources like sale of goods, interest on bank deposits etc.
He has to spend money on certain items like purchase of goods, salary, rent, etc. These activities
take place during the normal course of his business. He would naturally be anxious at the year
end, to know the progress of his business. Business transactions are numerous, that it is not
possible to recall his memory as to how the money had been earned and spent. At the same
time, if he had noted down his incomes and expenditures, he can readily get the required
information. Hence, the details of the business transactions have to be recorded in a clear and
systematic manner to get answers easily and accurately for the following questions at any time
he likes.
i. What has happened to his investment?
ii. What is the result of the business transactions?
iii. What are the earnings and expenses?
iv. How much amount is receivable from customers to whom goods have been sold on
credit?
v. How much amount is payable to suppliers on account of credit purchases?
vi. What are the nature and value of assets possessed by the business concern?
vii. What are the nature and value of liabilities of the business concern?
These and several other questions are answered with the help of accounting. The need for
recording business transactions in a clear and systematic manner is the basis which gives rise to
Book-keeping.

1.3 OBJECTIVE OF ACCOUNTING

Objective of accounting may differ from business to business depending upon their
specific requirements. However, the following are the general objectives of accounting.

Systematic record of transactions

To discover the results of the operation

To determine To discover To depict liquidity

profit and loss financial position position

To protect
business
properties

Rational decision making

To keeping systematic record It is very difficult to remember all the business
transactions that take place. Accounting serves this purpose
of record keeping by promptly recording all the business
transactions in the books of account.

To ascertain the results of the Accounting helps in ascertaining result i.e., profit earned
operation or loss suffered in business during a particular Period.
For this purpose, a business entity prepares either a Trading
and Profit and Loss account or an Income and
Expenditure account which shows the profit or loss of the
business by matching the items of revenue and expenditure
of the same period.

To ascertain the financial position of In addition to profit, a businessman must know his financial
the business position i.e., availability of cash, position of assets and
liabilities etc. This helps the businessman to know his
financial strength. Financial statements are barometers of
health of a business entity.

To depict the liquidity position: Financial reporting should provide information about how
an enterprise obtains and spends cash, about its
borrowing and repayment of borrowing, about its capital
transactions, cash dividends and other distributions of
resources by the enterprise to owners and about other factors
that may affect an enterprise’s liquidity and solvency.

To protect business properties Accounting provides up to date information about the

various assets that the firm possesses and the liabilities
the firm owes, so that nobody can claim a payment which is
not due to him.

To facilitate rational decision – Accounting records and financial statements provide

making financial information which help the business in making
Rational decisions about the steps to be taken in respect of
various aspects of business.

1.4 USES OF ACCOUNTING or IMPORTANTS OF ACCOUNTING

In 2001 the IASB adopted a Framework for the Preparation and Presentation of
Financial Statements which set out certain concepts that underlie the preparation and
presentation of financial Statements. The Framework identifies the following seven groups of
users together with the information which they need from the financial statements:

Lenders
Suppliers
And other trade
Creditors

Public/ investors

Users of accounting
Employee
or financial
statement
Owners

Customers
Government and
their agency

USERS GROUP INFORMATION NEEDS

Owners The owners provide funds or capital for the organization. They
possess curiosity in knowing whether the business is being
conducted on sound lines or not and whether the capital is
being employed properly or not. Owners, being businessmen,
always keep an eye on the returns from the investment. Comparing
the accounts of various years helps in getting good pieces of
information.
Employees: Payment of bonus depends upon the size of profit earned by the
firm. The more important point is that the workers expect regular
income for the bread. The demand for wage rise, bonus, better
working conditions etc. depend upon the profitability of the firm
and in turn depends upon financial position.

Investors: The prospective investors who want to invest their money in a

firm of course wish to see the progress and prosperity of the
firm, before investing their amount, by going through the
financial statements of the firm. This is to safeguard the investment

Government Government keeps a close watch on the firms which yield good
amount of profits. The state and central Governments are
interested in the financial statements to know the earnings for
 the purpose of taxation. To compile national accounting is
essential
Consumers These groups are interested in getting the goods at reduced price.
Therefore, they wish to know the establishment of a proper
accounting control, which in turn will reduce to cost of production,
in turn fewer prices to be paid by the customers. Researchers are
also interested in accounting for interpretation.

Creditors Profit and Loss Account and Balance Sheet are nerve centers to
know the soundness of the firm. Creditors are the persons who
supply goods on credit, or bankers or lenders of money. It is
usual that these groups are interested to know the financial
soundness before granting credit.

Management: The management of the business is greatly interested in knowing

the position of the firm. The accounts are the basis, the
management can study the merits and demerits of the business
activity. The financial accounting is the “eyes and ears of
management and facilitates in drawing future course of action,
further expansion etc.”

1.5 BOOK KEEPING

Every day business transactions may be around hundreds/thousands. Can a businessman

remember all these transactions in every respect? Not at all. So it becomes necessary to record
these business transactions in details and in a systematic manner. Recording of business
transactions in a systematic manner in the books of account is called book-keeping. Book-
Keeping is concerned with recording of financial data. It is important to note that only those
transactions related to business which can be expressed in terms of money are recorded. The
activities of book-keeping include recording in the journal, posting to the ledger and balancing of
accounts.

DEFINITION
“Book-keeping is the science and art of correctly recording in the books of account all those
business transactions that result in the transfer of money or money’s worth”.
R.N. Carter
“The art of keeping a permanent record of business transactions is book keeping”.
A.H.Rosenkamph.
OBJECTIVES

i. to have permanent record of all the business transactions.

ii. To keep records of income and expenses in such a way that the net profit or net loss may be
calculated.
iii. To keep records of assets and liabilities in such a way that the financial position of the
business may be ascertained.
iv. To keep control on expenses with a view to minimize the same in order to maximize profit.
v. To know the names of the customers and the amount due from them.
vi. To know the names of suppliers and the amount due to them.
vii. To have important information for legal and tax purposes.

1.6 BOOK KEEPING VS ACCOUNTING

BASIS OF BOOK-KEEPING ACCOUNTING

DISTINCTION
Nature It is concerned with identifying It is concerned with summarizing the
financial transactions, measuring them recorded transactions, interpreting
in monetary terms; recording and them and communicating the results.
classifying them.
Scope Recording and maintenance of books It is not only recording and maintenance
of accounts. of books of accounts but also includes
analysis, interpreting and
communicating the information.
Responsibility A book-keeper is responsible for An accountant is also responsible for the
recording business transactions. work of a book-keeper.
Objective It is to maintain systematic records It aims at ascertaining business income
of financial transactions and financial position by maintaining
records of business transactions
Function It is to record business It is the recoding, classifying,
transactions.So its scope is limited. summarizing, interpreting business
transactions and communicating the
results. Thus its scope is quite wide.
Stage Primary stage. Secondary stage.
Basis Vouchers and other supporting Book-keeping works as the basis for
documents are necessary as evidence accounting information
to record the business transactions.
Level of It is enough to have elementary For accounting, advanced and in-depth
knowledge Knowledge of accounting to do book knowledge and understanding is
keeping. required.
Relation Book-keeping is the first step to Accounting begins where bookkeeping
accounting. ends
Staff involved Work is done by the junior involved Senior staff performs the accounting
staff of the organization. work.
ACCOUNTANCY, ACCOUNTING AND BOOK-KEEPING

Accountancy refers to a systematic knowledge of accounting. It explains “why to do”

and “how to do” of various aspects of accounting. It tells us why and how to prepare the
books of accounts and how to summarize the accounting information and communicate it to the
interested parties.

Accountancy

Accounting

Book
keeping

Accounting refers to the actual process of preparing and presenting the accounts. In other
words, it is the art of putting the academic knowledge of accountancy into practice
Book-keeping is a part of accounting and is concerned with record keeping or
maintenance of books of accounts. It is often routine and clerical in nature.
Book-keeping provides the basis for accounting and it is complementary to accounting
process. Accounting begins where book-keeping ends. Accountancy includes accounting and
book-keeping. The terms Accounting and Accountancy are used synonymously.

BRANCHES OF ACCOUNTING

Increased scale of business operations has made the management function more complex. This
has given rise to specialized branches in accounting. The main branches of accounting are
Financial Accounting, Cost Accounting and Management Accounting.

Branches of
Accounting

Financial Cost Management

Accounting Accounting Accounting
Financial Accounting
It is concerned with recording of business transactions in the books of accounts in such a way
that operating result of a particular period and financial position on a particular date can be
known.

Cost Accounting
It relates to collection, classification and ascertainment of the cost of production or job
undertaken by the firm.

Management Accounting
It relates to the use of accounting data collected with the help of financial accounting and cost
accounting for the purpose of policy formulation, planning, control and decision making by the
management.

1.7 ACCOUNTING SYSTEMS

Types of accounting
systems

Cash systems Accrued systems

Mixed or Hybrid
Basis of Accounting

Cash system of accounting:

It is a system in which accounting entries are made only when cash is received or paid.no
entry is made when a payment or receipts is merely due. Government system of accounting is
mostly on the cash systems.
Accrued system mercantile system of accounting
It is a system in which accounting entries are made on the basis of amount become due
for payment or receipts. These systems recognize the facts that if a transaction or event has
occurred.
Mixed or Hybrid Basis of Accounting
When certain items of revenue or expenditure are recorded in the books of account on cash basis
and certain items on mercantile basis, the basis of accounting so employed is called ‘hybrid basis
of accounting’. For example, a company may follow mercantile system of accounting in respect
of its export business. However, government subsidies and duty drawbacks on exports to be
received from government are recorded only when they are actually received.
1.7 ACCOUNTING SYSTEMS

Accounting
Double Entry
Single Entry system
System
system

1.7.1SINGLE ENTRY:
It is incomplete system of recording business transactions. The business organization
maintains only cash book and personal accounts of debtors and creditors. So the complete
recording of transactions cannot be made and trail balance cannot be prepared.

1.7.2 DOUBLE ENTRY SYSTEM:

There are numerous transactions in a business concern. Each transaction, when closely
analyzed, reveals two aspects. One aspect will be “receiving aspect” or “incoming aspect” or
“expenses/loss aspect”. This is termed as the “Debit aspect”. The other aspect will be “giving
aspect” or “outgoing aspect” or “income/gain aspect”. This is termed as the “Credit aspect”.
These two aspects namely “Debit aspect” and “Credit aspect” forms the basis of Double Entry
System.
The double entry system is so named since it records both the aspects of a transaction .In
short, the basic principle of this system is, for every debit, there must be a corresponding credit
of equal amount and for every credit, there must be a corresponding debit of equal amount.

FEATURES
i. Every business transaction affects two accounts.
ii. Each transaction has two aspects, i.e., debit and credit.
iii. It is based upon accounting assumptions concepts and principles.
iv. Helps in preparing trial balance which is a test of arithmetical accuracy in accounting.
v. Preparation of final accounts with the help of trial balance.

MEANING OF DEBIT AND CREDIT:

The term ‘debit’ is supposed to have derived from ‘debit’ and the term ‘credit’ from
‘creditable’. For convenience ‘Dr’ is used for debit and ‘Cr’ is used for credit. Recording of
transactions require a thorough understanding of the rules of debit and credit relating to accounts.
Both debit and credit may represent either increase or decrease, depending upon the nature of
account.
1.7.3 SINGLE ENTRYSYSTEM vs. DOUBLE ENTRY SYSTEM:

Nature Single Entry system Double Entry system

Meaning Single entry system is an Double entry system is a

incomplete system of complete system of recording
recording financial and reporting financial
transactions transactions
Accounts Single entry system maintains Double entry system all
only personal accounts of personal, real and nominal
debtors and creditors and cash accounts.
book.
Trial Balance Single entry system cannot Double entry system prepares
prepare a trial balance and trial balance and hence,
hence, arithmetical accuracy arithmetical accuracy of the
of books of accounts cannot books of accounts can be
be checked. checked.

Profit Or Loss Single entry system cannot Double entry system

ascertain the true amount of ascertains true profit or loss of
profit or loss of the business as the business as it maintains all
it does not maintain nominal nominal accounts.
accounts.

Financial Position Single entry system cannot Double entry system

ascertain the true financial ascertains financial position of
position of the business the business as it maintains all
because it does not maintain personal and real accounting
real accounts except cash
book.
Suitability Single entry system is suitable Double entry system is
to a small business where only suitable for a large business.
limited number of transactions
are performed.
Tax Purpose Single entry system is not Double entry system is
acceptable for the purpose of acceptable for the purpose of
assessment of tax assessment of tax.
1.8 TYPES OF ACCOUNTS
The transactions are recorded in the books under a unique account. Each account is
assigned a separate name to distinguish it from other accounts. While making an entry in the
books, first we should see, to which category of accounts it belongs. There are mainly three types
of accounts.

(i) Transactions relating to persons.

(ii) Transactions relating to properties and assets
(iii) Transactions relating to incomes and expenses.
The accounts falling under the first heading are known as ‘personal Accounts’. The
accounts falling under the second heading are known as ‘Real Accounts’, the accounts falling
under the third heading are called ‘Nominal Accounts’. The accounts can also be classified as
personal and impersonal. The following chart will show the various types of accounts

ACCOUNTING

Personal Impersonal
accounting accounting

EX: ravi, sole prop, SBI bank.

Real Nominal
Debit the receiver
accounting accounting
Credit the receiver
EX: Cash, building EX: salary

Debit what comes in Debit all expenses and loss

Credit what goes out Credit all income and gains

1. Personal Accounts.
Accounts related to persons (living ornon-living) are called personal accounts. In
business we have to deal with a number of persons. Some are living like us and some are
artificial which do not have a living existence but have a separate legal existence.Thus in
accountancy we classify persons into
Natural Persons
Artificial Person.
Natural persons are the persons who are living e.g. Rahul, Mohan, Sam, Peter etc.
Artificial persons are all the firms, companies, institutions with whom you deal. In accounts
business is a separate legal entity which has an existence of its own. Similarly the other
companies, firm or organizations are regarded as separate legal entities.These are regarded
as artificial persons... Examples of artificial persons are ABC Ltd, Wipro Ltd, Hindustan Lever,
X and Co, Ahuja & sons etc.

Debit the Receiver

Credit the Giver

2. Real Accounts
Accounts related to assets (tangible or intangible) come under the category of real
accounts e.g. land, furniture, machinery, goodwill, patents etc. are real accounts. Some of the
assets of the business are such which you can touch, see and feel. Tangible assetshave physical
existence.g.cash, inventories, debtors, securities, land, building, machinery, furniture,
equipment’s, vehicles etc. assets which can be seen, touched and felt. These assets are called
tangible assets.
In business it’s not necessary that all assets must have a physical existence. Some assets
are such which cannot be touched, seen or felt but still they have an economic value. The
example of such assets are Goodwill, patents, trademarks, brand value, human intelligence.
These assets are called intangible assets. These assets just like tangible assets can be sold and
bought in the market and these appear on the balance sheet of the company together with other
assets.

Debit what comes in

Credit what goes out

3. Nominal Accounts
These are the accounts related to incomes and expenditures of a business
entity. Expenditure or expenses are the amount paid or payable which has given its benefit
to the business in the fiscal year.e.g. Salaries, wages, carriage, transportation, rent,
electricity, stationary, taxes, commissions paid, interest paid etc. Incomes are the receipts which
increase the profits of the business. Examples of incomes are rent received, commission
received, interest received, dividend received etc.

Debit all the expenses and losses

Credit all incomes and gains
1.9 Analyze the transactions

Transaction Accounts Nature of How affected Whether

involved accounts to
be
debited
or
credited
(a)Ramesh started his Cash A/c Real Cash is coming in Debit
business with cash Capital A/c Personal Ramesh is the giver Credit
(b) Borrowed from Nikhil Cash A/c Real Cash in coming in Debit
Loan from Personal Nikhil is the giver Credit
Nikhil A/c
(c) Purchased furniture Furniture A/c Real Furniture is coming Debit
Cash A/c Real in Credit
Cash is going out
(d) Purchased furniture from Furniture A/c Real Furniture is coming Debit
Mohan on credit Mohan A/c Personal in Credit
Mohan is the giver
(e) Purchased goods for cash
Purchases A/c Real Goods are coming in Debit
Cash A/c Real Cash is going out Credit
(f) Purchased goods from Purchases A/c Real Goods are coming in Debit
Ram on credit Ram’s A/c Personal Ram is the giver Credit
(g) Sold goods for cash Cash A/c Real Cash is coming in Debit
Sales A/c Real Goods are going out Credit

(h) Sold goods to Hari on Hari’s A/c Personal Hari is the receiver Debit
credit Sales A/c Real Goods are going out Credit

(i) Received cash from Hari Cash A/c Real Cash is coming in Debit
Hari’s A/c Personal Hari is the giver Credit
j)Withdrew cash for personal Drawings A/c Personal Ramesh is the Debit
use Cash A/c Real receiver Credit
Cash is going out
(k) Withdrew from bank for Cash A/c Real Cash is coming in Debit
office use Bank A/c Personal Bank is the giver Credit
l) Paid an advance to Advance to Personal Suppliers are the Debit
suppliers of goods Suppliers A/c Real receivers Credit
Cash A/c Cash is going out
(m) Received an advance Cash A/c Real Cash is coming in Debit
from customers Adv. from Personal Customers are the Credit
Customers A/c givers
FUNCTIONS OF ACCOUNTING
A. Record Keeping Function:
The primary function of accounting relates to recording, classification and summary of
financial transactions-journalism, posting, and preparation of final statements. These facilitate to
know operating results and financial positions. The purpose of this function is to report regularly
to the interested parties by means of financial statements. Thus accounting performs historical
function i.e., attention on the past performance of a business; and this facilitates decision making
programmed for future activities
B. Managerial Function:
Decision making programmed is greatly assisted by accounting. The managerial function
and decision making programmers, without accounting, may mislead...
C. Legal Requirement function:
Auditing is compulsory in case of registered firms. Auditing is not possible without
accounting. Thus accounting becomes compulsory to comply with legal requirements.
Accounting is a base and with its help various returns, documents, statements etc., are prepared.
D. Language of Business:
Accounting is the language of business. Various transactions are communicated through
accounting. There are many parties-owners, creditors, government, employees etc., who are
interested in knowing the results of the firm and this can be communicated only through
accounting. The accounting shows a real and true position of the firm or the business.

Glossary
Accounting: It is the maintenance of daily record of All financial transactions in such a manner
that it would help in the preparation of suitable information regarding the financial affairs of a
business or an individual.
Financial Accounting needed: The need for recording financial transactions arises because the
individual or business wants to know theperformance of the business and to assist the person in
making decisions related to the business.
Transactions: In accounting or business terms, any dealing between two persons involving
money or a valuable thing is called transaction
Cash transaction:When the money value of an item being purchased is paid at the same time
the item is exchanged the transaction is said to be a cash transaction
Record Keeping: We can maintain a diary of transactions and note the daily transactions like
sale, purchase etc. in it.
Credit transaction: it is an agreement between a buyer and seller for deferred payment on
goods and services
Purchases: This term is used for goods to be dealt-in i.e. goods are purchased for resaleor for
producing the finished products which are meant for sale.
Sales: Sales are total revenues from goods or services provided to customers. Sales may be in
cash or in credit.
Assets A resource controlled by the entity as a result of past events and from which future
economic benefits are expected to flow to the entity.
Capital The value of the investment of the owner or owners in the business, found by deducting
all of the organization’s liabilities from all of the organization’s assets. Also known as 'equity'.
Expenses Expenditure made by a business related to the revenue generated within the same
financial period. It includes goods bought for resale, and overheads such as light and heat, wages
and salaries.
Financial accounting: theday-to-day recording of an organization’s financial transactions and
the summarizing of those transactions to satisfy the information needs of various user groups in
accordance with the regulatory framework.
Management accounting theinternal accounting needs of an organization, involving planning,
forecasting andbudgeting for decision-making purposes.
Revenue The revenue generated by the business by selling its goods or services, plus sundry
incomesuch as interest received.
Bookkeeping The process of recording financial transactions.
Single entry accounting/Cash accounting. This system records only cash movement of
transactions and that too up to the extent of recording oneaspect of the transactions.This means
that only receipt or payment of cash is recorded and no separate record is maintained (aboutthe
source of receipt and payment) as to from whom the cash was received or to whom it was paid.
Double entry book keeping/Commercial accounting.
Double entry or commercial accounting system records both aspects of transaction i.e. receipt or
payment and source of receipt or payment. It also records credit transactions i.e. recording of
Electricity Bill or accruals of Salary payment etc.
Expenses: Costs incurred by a business in the process of earning revenue are calledexpenses.

Credit: The right-hand side of a ledger account. Liability, capital and income accounts have
credit balances. Abbreviated to Cr.
Debit The left-hand side of a ledger account. Asset and expenses accounts have debit balances.
Abbreviated to Dr.

B.COM

1. What is the difference between accounts and finance?

2. Assets are shown on the balance sheet at cost less depreciation. If the market value of the asset
is higher, is this not a misrepresentation? What accounting concept is involved in this?
3. What is costing?
4. Make a profit and loss account and a balance sheet.
5. What is the difference between finance and accounts, shares and debentures?
6. What is SLR? CRR? What is the difference between the two?
7.What is Working capital turnover ratio?
It is also known as Working Capital Leverage Ratio. This ratio indicates whether or not working
capital has been effectively utilized in making sales.
Formula: Net Sales
----------------------------
Working Capital
8.What is Floating Change?
Assume change on some or all assets of an enterprise which are not attached to specific assets
and are given as security against debt.
9.What are the important things to be remembered while preparing a bank reconciliation
statement?
Cheques issued but not presented for payment
Amount credited in Passbook but not in Cash book
Deposits made in the bank directly
Wrong credits given by bank
Interest credited in the Passbook.
10. What is Accrual System of Accounting?
This system of accounting is considered to be ideal but it may result into unrealized profits which
might reflect in the books of the accounts on which the organization have to pay taxes too.

M.B.A

1. Cost of production: In office and administration overheads are added to factory cost, office
cost is arrived at.
2. Fictitious assets: These are assets not represented by tangible possession or property.
Examples of preliminary expenses, discount on issue of shares, debit balance in the profit And
loss account when shown on the assets side in the balance sheet.
3. Provision: provision usually means any amount written off or retained by way of providing
depreciation, renewals or diminutions in the value of assets or retained by way of providing for
any known liability of which the amount cannot be determined with substantial accuracy.
4. Optimum capital structure: Capital structure is optimum when the firm has a combination of
equity and debt so that the wealth of the firm is maximum.
5. Time value of money: The time value of money means that worth of a rupee received today is
different from the worth of a rupee to be received in future.
6. Capital budgeting: Capital budgeting involves the process of decision making with regard to
investment in fixed assets. Or decision making with regard to investment of money in long-term
projects
7. Bridge finance: It refers to the loans taken by the company normally from commercial banks
for a short period pending disbursement of loans sanctioned by the financial institutions.
8. Certificate of deposits: The CD is a document of title similar to a fixed deposit receipt issued
by banks there is no prescribed interest rate on such CDs it is based on the prevailing market
conditions.
9. GDR (Global depository receipts): A depository receipt is basically a negotiable certificate,
dominated in us dollars that represents a non-US company publicly traded in local currency
equity shares.
10. Master budget: A summary of budget schedules in container form made for the purpose of
presenting in one report the highlights of the budget forecast.
 Accounting Career Opportunities

Public Accounting Private Accounting Careers in

Careers in auditing, taxation, industry working in cost accounting,
And management consulting budgeting, accounting information
Serving the general public. systems, and taxation.

Government Forensic Accounting

Careers with the IRS, the Uses accounting, auditing,
FBI, the SEC, and in public and investigative skills to conduct
Colleges and universities.
investigations into theft and fraud.

Accounting manager

Accounting Manager Role Responsibilities & Duties

 Obtain and maintain a thorough understanding of the financial reporting and general
ledger structure.
 Ensure an accurate and timely monthly, quarterly and year end close.
 Ensure the timely reporting of all monthly financial information.
 Assist the Controller in the daily banking requirements.
 Ensure the accurate and timely processing of positive pay transactions.
 Ensure the monthly and quarterly Bank Compliance activities are performed in a
timely and accurate manner.

Accounting Manager Skills and Qualifications:

 Advanced computer skills on MS Office, accounting software and databases

 Ability to manipulate large amounts of data

 Developing Budgets, Legal Compliance, Tracking Budget Expenses, SFAS Rules, Accounting,
Managing Processes, Reporting Research Results

 Management Proficiency, Coordination, Motivating Others, Attention to Detail

 Financial manager

Finance managerSpecific Responsibilities

 Prepare monthly analysis of cost of goods sold and operational expenses against prior
year and budget, providing explanations and business solutions to help mitigate the
risks.
 Partner with Product Management and Purchasing Team in determining financial
impact due to product cost reductions, new product roll out, etc. and prepare periodic
forecasts to update management on projected results.

Education and Experience Requirements:

 Two to four years of experience in a similar position; experience with operations

preferred.
 CPA or MBA preferred.
 Have a flare for numbers, work well with people, aggressively anticipate impacts of
workload/issues to team deadlines and have a very positive work attitude including
willing to work some longer hours during peak periods.
 liaising with auditors to ensure annual monitoring is carried out;
 developing external relationships with appropriate contacts, e.g. auditors, solicitors,
bankers and statutory organizations such as the Inland Revenue

PREVIOUS QUESTION PAPERS

1. what do you mean by accounting? And illustrate its scope.

2. Classify the types of accounts and write accounting rules with
example transaction for each type of account.