Accounting

In 1941, the American Institute of Certified Public Accountants (AICPA) defined

accounting as the art of Recording, classifying, and summarizing in a significant manner and
in terms of money, transactions and events which are, in part, at least, of a financial character,
and interpreting the results thereof.

In 1966 the American Accounting Association (AAA) defined Accounting as: The
process of Identifying, Measuring and communicating economic information to permit
informed judgments and decisions by users of the information.

Branches of Accounting:
Financial Accounting: It is concerned with recording of financial transaction in a systematic
way so that trading a/c, Profit & loss a/c and Balance sheet can be prepared at the end of the
year. These financial statements will help owners and others studying the profitability and
financial position of the business.

Cost Accounting: It is that branch of account that is mainly concerned with costing information,
which is useful to the management for the purpose of cost ascertainment and cost control.

Management Accounting: It is the accounting, which provide necessary information to the

management discharging its function such as planning, organizing, directing, and controlling
more efficiently.

Transactions: It refers to any happening event which is measurable in terms of money and
which changes the financial position of the business concern.
 BASICS OF ACCOUNTS

Account is divided in following three types:

1. Personal account: Any individual person or any firms or any company or a bank is
considered in a personal account.
Persons:
1) Natural: Angel, Siva, Venu, Ramesh
2) Artificial: Mythri Ojas Institute, SBI Bank a/c
3) Representative: Tax ( VAT), Out standings

Principal of Personal account

Debit : The receiver

Credit: The giver

2. Real account: (Assets) Account of any physical things. The cash account or goods account
are examples of real account.
Assets:
a) Current Assets: Which things are easily convertible into cash with in 12months (one
year).
Ex: Cash a/c, Bank a/c, Stock in hand, deposits (assets), Loans and advances (assets)
Sundry Debtor.

b) Fixed Assets: Which things are not easily convertible into cash with in 12months
(one year).

Tangible: which we can touch and see

Ex: Building, Car, Computer etc

Intangible: which we cant see but we can measure

Ex: copy rights, good wheel etc...

Principal of real account

Debit: What Comes In

Credit: What Goes Out

3. Nominal account: Account of any invisible things that means that things are in terms of
cash. For example: insurance account, rent account etc.

Principal of Nominal account

Debit: All Expenses and loses
Credit: All incomes and Gains
 Meaning of Company: A company is an association of many persons who contribute
money or moneys worth to common stock and employs it for a common purpose. The
Common stock so contributed is denoted in money and is the capital of the company.

Types of a company:
a) Companies limited by shares
b) Companies limited by guarantee
c) Unlimited companies
d) Private company
e) public company

Private company: A private co. is which by its AOA: Restricts the right of the members to
transfer of shares Limits the no. Of members 50. Prohibits any Invitation to the public to
subscribe for its shares or debentures.

Public company: A company, the articles of association of which does not contain the
requisite restrictions to make it a private limited company, is called a public company.

Characteristics of a company:
Voluntary association
Separate legal entity
Free transfer of shares
Limited liability
Common seal
Perpetual existence.