MGT101: Financial Accounting – I
Accounting is the process of recording, summarizing, and reporting on a company’s business operations in financial statements. These statements are income statement, balance sheet, cash flow statement, and savings statement. MGT101 Handouts pdf
MGT101 Handouts pdf
Course Category: Accounting, Banking & Finance
Basic concepts and terminologies used in accounting, Accounting equation, Double-entry bookkeeping, Accounting cycle: Journal, Ledger, Trial Balance and preparation of Financial Statements. Bank Reconciliation Statement, Accrual Accounting, Provision for Bad and Doubtful Debts, Accounting for Fixed Assets and Depreciation, Control Accounts, Rectification of Errors, Final Account with Adjustments, Manufacturing Account, Accounting for Inventories, Accounting for Partnership Firms, Company Financial Statements and Statement of Cash Flows. MGT101 Handouts pdf
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MGT101: Financial Accounting – I
Keeping a daily record of all financial transactions in a way that can help prepare relevant information about the financial or business affairs of the business or individual. The need to record financial transactions arises because the person or entity wants to know how the business is operating and to assist the person in making decisions related to the business.
What is a Transaction?
In terms of accounting or business transactions, any transaction between two persons involving a financial transaction or transaction is called a transaction. Humans are social animals and have definitely adopted the social life. Living in a society, in fact, means that people interact with other people and depend on each other to fulfill their needs. Everyone cannot meet all their needs such as food, clothing, shelter, etc. Therefore, he relies on other people for his needs, in return for this to provide others with some of their own. Every time a person ‘gives something’ to ‘get something’ is called a transaction.
Money Measurement Concept
Over time, trade prices and the types of goods available on the market increase and it becomes difficult to exchange goods with other goods. That is why the concept of money/money was introduced and people began to value all goods/services in terms of a common asset called money. Now the price of 10 kg of wheat will be 60 Rupees instead of 2 meters of fabric. Similarly, the price of 2 meters of cloth and 5 liters of milk will also be Rupees 60. In accounting, everything that is worth recording is recorded financially. In other words, any event or item that cannot be translated financially is not recorded in the books of account
Cash and Credit Transactions
Translating all financial transactions does not always mean that money changes hands, at the same time as transactions occur. It may be paid before or after the goods are exchanged. When the purchase price is paid, at the same time the item is exchanged. An activity is called a financial transaction in other words, when the value of a transaction is reached in cash at the time of purchase such type of transaction is called cash. On the other hand, if payment is delayed until the next date, the function is called the debt service.
It is a system of counting events where events are recorded when real cash/check is received or paid. Let’s take the example of credit for utilities such as electricity, telephone, etc. The January Bill is received on 15th February and is payable on 25th February. If the organization follows the accounting practice it will record the cost of electricity/telephone by 25 February because the actual payment was made on that day. The same principle applies to income and other transactions and that is, income is recorded when cash is actually received instead of recording when received.