Basic of Accouting

ACCOUNTING CYCLE  The Series of business transactions which occur from the beginning of an accounting period to the end of an accounting period is referred any specific period of time for which a summary of business’s transaction is prepared. Steps in Accounting Cycle:1.

Journaliing !"ecording#

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%osting to &edger !Classifying#

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(inal Account !Summariing# !Summariing#

)ow *+plain Steps:1 "ecord "ecording ing::- This This is the basic basic functio function n of accou accounti nting ng.. All busines business s transac transactio tion, n, as eidenced by some documents such as Sale bill, %ass boo, Salary Slip ect are recorded in the boos of account. This is called recording process. $. Classifying:Classifying:- All entries entries in the Journal Journal or boos of /riginal *ntry should should be posted to the appropriate appropriate ledger accounts to find out at a glance the total effect of all such transactions transactions in a particular account. '. Summariing:Summariing:- 0t is concerned with the preparation and presentation of the the classified classified data in a manner useful to the 0nternal a well as the e+ternal users of financial statements.  This process leads to the preparation preparation of the following financial statements:statements:a# Trial alance b# %rofit 2 &oss Account c# alance Sheet d# Cash flow Statement.

DIFF. BETWEEN BOOK KEEPING AND ACCOUNTING

BOOK KEEPING

ACCOUNTING

1. 0t is is a %rocess concerned concerned with with recording recording of transaction.

1. 0t is a process process concerned with Summariing Summariing of the recorded transaction.

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0t is the basic of accounting.

0t is the basic for business language.

'. %erson responsible responsible for for boo-eeping boo-eeping are called called boo eeper.

'. %ersonal %ersonal responsibl responsible e called accountant.

3. 0t does does not not re4u re4uire ired d any specia speciall sill sill or 5nowledge.

3.

6. %ersonal 7udgment of the boo-eeper is not re4uired. 8.

(inanci (inancial al statement statement are not prepared prepared from from

for

account accounting ing

are

0t re4uired special Sill 2 nowledge.

6. %ersonal %ersonal Judgmen Judgmentt of the account accountant ant is essential. 8. (inancial (inancial statement are prepared from accounting record.

boo-eeping record. 9. 0t does not gie gie the the compl complete ete picture picture of the financial condition of the business unit. . 0t does does not help help comply complyin ing g with with legal legal formalities.

9. 0t gies the complete picture of the financial financial conditions of the business unit. . &egal formalities can be complied with help of accounting. ;.

0t proides 0nformation 0nformation for taling managerial

;. 0t does not proide any information for taling managerial decision.

decision.

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