CHAPTER-1CHAPTER-1MEANING AND SCOPE OF MEANING AND SCOPE OF

ACCOUNTINGACCOUNTING

1. 1. Need:-Need:-

2. 2. Book keeping:-Book keeping:- According to R.N.Carter,” Book keeping is the science and art of According to R.N.Carter,” Book keeping is the science and art of

correctly recording in books of accounts all those transactions that correctly recording in books of accounts all those transactions that result in the transfer of money or money's worth”.result in the transfer of money or money's worth”.

3. 3. Accounting:-Accounting:- According to R.N.Anthony, “ nearly every business enterprise has According to R.N.Anthony, “ nearly every business enterprise has

accounting system. It is a means of collecting, summarizing, accounting system. It is a means of collecting, summarizing, analyzing,analyzing,

and reporting in monitory terms, information about business”.and reporting in monitory terms, information about business”.

Branches of Accounting-Branches of Accounting-

Financial AccountingFinancial Accounting Cost AccountingCost Accounting Social Responsibility AccountingSocial Responsibility Accounting Tax AccountingTax Accounting Management AccountingManagement Accounting

Objectives/Functions of Objectives/Functions of Accounting-Accounting-

Systematic recordsSystematic records Ascertainment of profit or lossAscertainment of profit or loss Ascertainment of financial positionAscertainment of financial position Communication of results to interested partiesCommunication of results to interested parties Compliance with legal formalitiesCompliance with legal formalities

Characteristics of Accounting-Characteristics of Accounting- Economic eventsEconomic events -External events-External events -Internal events-Internal events Identification of economic eventsIdentification of economic events RecordingRecording ClassificationClassification Preparation of financial accountsPreparation of financial accounts Accounting in terms of moneyAccounting in terms of money Interpretation of final resultsInterpretation of final results

ADVANTAGES OF ADVANTAGES OF ACCOUNTING-ACCOUNTING-

Helpful in rememberingHelpful in remembering Helpful in planning and controllingHelpful in planning and controlling Helpful in decision makingHelpful in decision making Helpful in tax assessmentHelpful in tax assessment Comparative studyComparative study Proof in courtProof in court Helpful in sale of businessHelpful in sale of business Helpful in determination of GoodwillHelpful in determination of Goodwill Helpful in realization of debtsHelpful in realization of debts Helpful in case of insolvencyHelpful in case of insolvency Check on errors and fraudsCheck on errors and frauds Assessment of progressAssessment of progress

Parties interested in Accounting Parties interested in Accounting InformationInformation

Internal Parties:-Internal Parties:- 1) Owners1) Owners 2) Management2) Management 3) Employee3) Employee External Parties:-External Parties:- 1) Investors1) Investors 2) Creditors2) Creditors 3) Government3) Government 4) Researchers4) Researchers 5) Banks5) Banks

Limitations of Accounting-Limitations of Accounting-

Records only monetary transactions.Records only monetary transactions. Influence by personal judgment.Influence by personal judgment. Not fully accurate.Not fully accurate. Realizable value of business is not Realizable value of business is not

shown.shown. Manipulations in accounts.Manipulations in accounts. Complete control on fraud is impossible.Complete control on fraud is impossible. No quick information.No quick information.