This document contains lecture slides on accounting concepts and principles from Taj Mohammad Tamkeen. The slides cover topics such as the accounting cycle, basic accounting terminology, the accounting equation, books of accounts including journals and ledgers, and financial statements including the balance sheet and income statement. The slides also provide examples of accounting transactions and exercises for students.
Monthly Economic Monitoring of Ukraine No.230, March 2024
Financial Accounting Basics
1. lecturer: Taj Mohammad
Tamkeen
(+93700936596,+93788889
195) 1
Our Accounting Course
Introduction to Accounting
Balance Sheet
Journal
Ledgers
Trial Balance
Adjusting Entries
Income Statement
Owner Equity Statement
Closing Entries
2. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 2
WHAT IS ACCOUNTING?
The basic objectives of commerce education is
to produce skilled office worker for various
business concerns. This field includes the
subjects like economics, commerce, banking,
insurance. Accounting is one of the most
important subject of this field you can learn to
prepare vouchers, invoices and recording,
classifying, and summarizing the business
transactions and finally prepare the financial
statements
3. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 3
What is Accounting?
Definition
Accounting is the Art of Collecting, Recording,
Classifying and summarizing the business
transactions and finally preparing the financial
statements.
Purpose of Accounting
The basic purpose of accounting is to provide
Decision-makers information useful in making
economic decisions.
4. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 4
Book keeping
B.K> is an art of recording in books of
accounts, transactions in money or money’s
terms.
B.K> The systematic recording of financial
transaction of an enterprise is known as
book keeping.
B.K> is an art of recording business
transactions in terms of money under
appropriate heads.
5. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 5
Book keeping VS Accounting
Points of difference Book keeping Accounting
Scope of work Only recording the
business transactions
Classifying,
summarizing, preparing
financial statements
Job description Clerical in nature Technical in nature
Knowledge and skill No professional
knowledge and skill is
required
professional knowledge
and skill is required
Decision Maintaining the record Making decision
regarding to the business
activities
6. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 6
Special fields of accounting
Financial accounting:
this is also called a general accounting system, and prepares a periodical
reports.
Cost accounting:
It controls the cost of production and distribution it is also called
manufacturing accounting
Management accounting:
Its main function is to selection of best among alternatives and changing
the negative points into positive points.
Government accounting:
It is recording the financial transactions of the central and provincial
governments. it keeps the record of expenditure, taxes, revenues, and
budget of government departments
Auditing:
It is the examination of the accounting record and it is used to check
fairness and accuracy of the accounting record.
7. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 7
Book Keeping Systems.
•Single Entry Sys.
•Double Entry Sys.
8. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 8
Basic Terminologies
Business:
Any activity under taken for the purpose of earning profits but legally is called business.
Proprietor:
A person who invests the money or things in the business is called proprietor or owner.
Transaction:
Any dealing between persons for goods or services which effect the financial position of a business is called
transaction. but can be measured in term of money.
Voucher:
Any written evidence of business transaction is called voucher.like bill, invoice, cash memo.
Cash memo:
Any written proof evidence for the goods purchased from a particular seller is called C.M
Invoice:
A written document given by the seller to the buyer for credit sale of goods is called invoice.
9. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 9
Basic Terminologies
Account:
It is a systematic record of increase and decrease in an item during a certain period of time.
Merchandise:
Things purchased for the purpose of re-selling in same condition is called merchandise.
Purchase:
This is the cost of merchandise purchased it has two types.
Cash purchase
Credit purchase
Sales:
The amount earned from sales of goods is called sales it also has two types.
Cash sales
Credit sales
Revenues:
All sort of income received or occurred is called revenue. Ex>sales, Commission, Interest
Expenses:
These are certain payments of the business.
10. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 10
Basic Terminologies
Profit/Income:
Loss:
When the expense become higher than the revenue is called Loss.
Discount:
it has two types.
Trade Discount (Discount allowed/Discount received)
Cash Discount (Discount allowed/Discount received)
Commision:
Remanuration for services performed by one person to another normally the %age basis is called
commision.
Stock/Inventory:
Good or merchandise on hand or unsold is called stock.
Turn over:
This is a processes of goods in which it will complete from raw materials to finish goods.
11. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 11
Basic Terminologies
Balance:
Means the remaining it may be cash, A/R or goods.
Account Receivable/Debtor:
A person to whom gods are sold on credit by a business organization .
Account Payable:
A person from whom a business organization or individual purchases goods on credit
Notes payable:
A note or bill from the view of its drawee is called notes/bill payable.
Notes Receivable:
A note or bill from the view of its drawer is called notes/bill receivable.
Cash book:
This is a book of cash receipt and payment. It has three types.
Single column cash book
Two column cash book
Three column cash book
12. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 12
Basic Terminologies
Bad Debts/Uncollectible:
The amount which can not be received from the debtor.
Reserve/Provision/Allowances for bad debts/Doubtful debts:
Outstanding/Accrued/Payable/Unpaid expenses:
Prepaid/Paid in advance/Un-expired Expenses:
Accrued/Outstanding/Receivable income:
Unearned/Received in advance income:
13. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 13
Basic Terminologies
Assets
Tangible
Visible
Intangible
Invisible
Fixed
Asset
Curren
tasset
Land Building
Cash Furniture
C.in.H C.at.B
Stock AC/R
Exampl
es
T.M C.R G.W
Patien
ts
14. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 14
Basic Terminologies
Equity:
The claim against the asset of the firm is called equity. It is divided into two category.
Liability
Is the claim of outsider against the asset of the firm.
1. Short Term liability
2. Long Term Liability
Owner’s Equity
Is the claim of owner against the asset of the firm.
Equity may be.
1. Capital invested by the owner
2. Net income
15. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 15
Basic Terminologies
Drawings:
The cash withdraw by the owner from business for his personal use is called drawings.
Financial statements:
Income statement:
Shows the profit or loss of the business at the end of accounting period.
Balance Sheet:
Shows the position of the business. It has the following formula for showing the position of the
business.
Asset = Equities
Asset = owner equity (Capital) + Liability
100000 = 75000+25000
100000
16. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 16
Accounting Cycle
Closing Statements
Financial statement
Work sheet
Adjusting
Ledger
Journal
Recording
Classifying
Fairness & Accuracy
Show full Result
Balance sheet &
income statement
Closing of entries
17. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 17
Rules for Debit & Credit
Asset/Expenses
Debit Credit
Decrease Increase
Liability/Capital/Revenue
Debit Credit
Increase Decrease
18. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 18
Classes of account
Expenses
Asset
Sales
Purchase
Capital
A/C Payables
A/C Receivables
E.t.c
20. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 20
Financial Statement
Balance Sheet
Shows the financial
position of an
organization
in a specific
time
21. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 21
Income Statement
Shows the profit and
loss of an organization
in a specific time
Financial Statement Contd.
22. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 22
Financial Statement Contd.
Owners Equity Statement
Shows changes in
equity of the owner/s
in a specific time.
24. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 24
Balance Sheet
Shows the financial position of an organization in a specific time
25. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 25
Balance Sheet Cont.
Balance Sheet has two main parts
Heading:
Name of company
Name of statement
Date
Body:
Assets
Liabilities
Owners Equity
26. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 26
Balance Sheet Cont.
ASSETS
Current/ Liquid Fixed/ Capital
•Assets that are being used within one year
•Assets that can be converted to cash
•Assets that are directly expensed
Resources that are owned by a business and
are expected to benefit future operations
•Assets are have a life longer than one year
•Assets that are not directly expensed, but
depreciated
•Assets that help the organization in running the
business operations
COST PRINCIPLE
•Cash
•Notes Receivable
•Accounts Receivable
•Supplies
•Land
•Building
•Office Equipment
27. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 27
Balance Sheet Cont.
Liabilities
Liabilities are company debts and obligations that
the company must pay
Notes Payable
Accounts payable
Salaries Payable
Owner Equity
The amount of owner’s net investment
Capital
28. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 28
Accounting Equation
Assets = Liabilities + Owners Equity
29. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 29
Exercise
What is liability?
What is cost principle?
Is furniture account fixed
asset or current asset?
What is accounting
equation?
30. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 30
Problems Associated with
Balance Sheet
31. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 31
Ledgers
Account
The record used to keep track of the increases and decreases
in financial statement items
Ledgers
The entire group of accounts kept together in an accounting
record
32. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 32
Debit & Credit
CreditDebit
The Left Side The Right Side
33. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 33
Rules of Debit & Credit
Assets Debit Asset Credit
Liability Credit Liability Debit
Owner Credit Owner Credit
Equity Equity
34. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 34
Form of an Account
Name of Account
Increase
Decrease
Decrease
Increase
35. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 35
Problems Associated with
Ledgers
Name of Account
Increase
Decrease
Decrease
Increase
Balance Balance
36. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 36
Journal
The First Book of Accounts in Which We
Record the Transactions Chronologically.
37. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 37
Why Use Journal
It shows all information about a transaction
in one place and also provides and
explanation of the transactions
It provides chronological record of all the
events in the life of a business
It helps prevent errors
39. lecturer: Taj Mohammad Tamkeen
(+93700936596,+93788889195) 39
Practice
Now lets practice the transactions of Robert
Real Estate Company through
Recording Transactions in Journal
Posting in Ledger
Preparing Balance Sheet