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Accounting For Managers - Basics of Accounting

Accounting Summary

   Posted On :  21.01.2018 07:20 am

Accounting is rightly called the language of business. It is as old as money itself. It is concerned with the collecting, recording, evaluating and communicating the results of business transactions. Initially meant to meet the needs of a relatively few owners, it gradually expanded its functions to a public role of meeting the needs of a variety of interested parties. Broadly speaking all citizens are affected by accounting in some way. Accounting as an information system possesses with accountants engaged in private and public accounting. As in many other areas of human activity a number of specialized fields in accounting also have evolved as a result of rapid changes in business and social needs. Accounting information should be made standard to convey the same meaning to all interested parties. To make it standard, certain accounting principles, concepts, conventions and standards have been developed over a period of time. These accounting principles, by whatever name they are called, serve as a general law or rule that is to be used as a guide to action. Without accounting principles, accounting information becomes incomparable, inconsistent and unreliable. An accounting principle to become generally accepted should satisfy the criteria of relevance, objectivity and feasibility. The fasb (financial accounting standards board) is currently the dominant body in the development of accounting principles. The iasc is another professional body which is engaged in the development of the accounting standards. The icai is an associate member of the iasc and the asb started by the icai is formulating accounting standards in our country. Both the iasc and icai consider going concern, accrual and consistency as fundamental accounting assumptions.


Key Words

 

·              Accounting: language of business.

 

·         Financial Accounting: concerned with the recording of transactions for a business enterprise and the periodic preparation of various reports from such records

 

·         Management Accounting: accounting for internal management needs.

 

·         Cost Accounting: accounting for determination and control of costs.

 

·         Accounting Principle: the body of doctrines commonly associated with the theory and procedure of accounting.

 

·         Accounting Concept: accounting postulates i.e. Necessary assumptions or conditions upon which accounting is based.

 

·         Accounting Conventions: convention signifies the customs or traditions which serve as a guide to the preparation of accounting statements.

 

·         Accounting Standard: standards to be observed in the presentation of financial statements.

 

Self Assessment Questions

1.               Why is accounting called the language of business?

 

2.         What are the functions of accounting?

 

3.         Accounting as a social science can be viewed as an information system. examine.

4.         Is accounting a staff function or line function? Explain the reasons.

 

5.         Give an account of the various branches of accounting.

 

6.         ‘accounting is a service function’. Discuss the statement in the context of a modern manufacturing business.

7.         Distinguish between financial accounting and management accounting.

8.         What are accounting concepts and conventions? Is there any difference between them?

9.         What is the significance of dual aspect concept?

 

10.     Write a short note on accounting standards.

 

11.     What is the position in india regarding the formulation and enforcement of accounting standards?

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