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Note for Accounting Process and Principles - APP By Dr.rupesh kumar Gang

  • Accounting Process and Principles - APP
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MBA - I Semester Paper Code: MBAC 1003 Accounting For Managers Objectives ՖՖ To acquaint the students with the fundamentals principles of financial, cost and management accounting ՖՖ To enable the students to prepare, analyse and interpret financial statements and ՖՖ To enable the students to take decisions using management accounting tools. Unit-I Book-Keeping and Accounting – Financial Accounting – Concepts and Conventions – Double Entry System – Preparation of Journal, Ledger and Trial Balance – Preparation of Final Accounts –Trading, Profit and Loss Account and Balance Sheet With Adjustment Entries, Simple Problems Only - Capital and Revenue Expenditure and Receipts. Unit-II Depreciation – Causes – Methods of Calculating Depreciation – Straight Line Method, Diminishing Balance Method and Annuity Method - Ratio Analysis – Uses and Limitations – Classification of Ratios – Liquidity, Profitability, Financial and Turnover Ratios – Simple Problems Only. Unit-III Funds Flow Analysis – Funds From Operation, Sources and Uses of Funds, Preparation of Schedule of Changes In Working Capital and Funds Flow Statements – Uses And Limitations - Cash Flow Analysis – Cash From Operation – Preparation of Cash Flow Statement – Uses and Limitations – Distinction Between Funds Flow and Cash Flow – Only Simple Problems 1

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Unit-IV Marginal Costing - Marginal Cost and Marginal Costing Importance - Break-Even Analysis - Cost Volume Profit Relationship – Application of Marginal Costing Techniques, Fixing Selling Price, Make or Buy, Accepting a Foreign Order, Deciding Sales Mix. Unit-V Cost Accounting - Elements of Cost - Types of Costs - Preparation of Cost Sheet – Standard Costing – Variance Analysis – Material Variances – Labour Variances – Simple Problems Related to Material And Labour Variances Only. [note: distribution of questions between problems and theory of this paper must be 60:40 i.e., problem questions: 60 % & theory questions: 40 %] REFERENCES Jelsy Josheph Kuppapally, ACCOUNTING FOR MANAGERS, PHI, delhi, 2010. Paresh Shah, BASIC ACCOUNTING FOR MANAGERS, Oxford, Delhi, 2007. Ambrish Gupta, FINANCIAL ACCOUNTING FOR MANAGEMENT, Pearson, Delhi, 2004. Narayanaswamy R, FINANCIAL ACCOUNTING , PHI, Delhi, 2011. 2

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UNIT – I: Basics of Accounting Lesson – 1.1 Accounting – An Introduction 1.1.1 Introduction Accounting is aptly called the language of business. This designation is applied to accounting because it is the method of communicating business information. The basic function of any language is to serve as a means of communication. Accounting duly serves this function. The task of learning accounting is essentially the same as the task of learning a new language. But the acceleration of change in business organization has contributed to increase the complexities in this language. Like other languages, it is undergoing continuous change in an attempt to discover better means of communications. To enable the accounting language to convey the same meaning to all stakeholders, it should be made standard. To make it a standard language certain accounting principles, concepts and standards have been developed over a period of time. This lesson dwells upon the different dimensions of accounting, accounting concepts, accounting principles and the accounting standards. 1.1.2 Learning Objectives After reading this lesson, the reader should be able to: ՖՖ ՖՖ ՖՖ ՖՖ ՖՖ ՖՖ ՖՖ Know the Evolution of Accounting Understand the Definition of Accounting Comprehend the Scope and Function of Accounting Ascertain the Users of Accounting Information Know the Specialized Accounting Fields Understand the Accounting Concepts and Conventions Realize the Need for Accounting Standards 1.1.3 Contents 1. 2. Evolution of accounting Book keeping and accounting 3

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3. Definition of accounting 4. Scope and functions of accounting 5. Groups interested in accounting information 6. The profession of accounting 7. Specialized accounting fields 8. Nature and meaning of accounting principles 9. Accounting concepts 10. Accounting conventions 11. Summary 12. Key words 13. Self assessment questions Evolution Of Accounting Accounting is as old as money itself. It has evolved, as have medicine, law and most other fields of human activity in response to the social and economic needs of society. People in all civilizations have maintained various types of records of business activities. The oldest known are clay tablet records of the payment of wages in babylonia around 600 b.c. accounting was practiced in india twenty-four centuries ago as is clear from kautilya’s book ‘arthshastra’ which clearly indicates the existence and need of proper accounting and audit. For the most part, early accounting dealt only with limited aspects of the financial operations of private or governmental enterprises. Complete accounting system for an enterprise which came to be called as “double entry system” was developed in italy in the 15th century. The first known description of the system was published there in 1494 by a franciscan monk by the name luca pacioli. The expanded business operations initiated by the industrial revolution required increasingly large amounts of money which in turn resulted in the development of the corporation form of organizations. As corporations became larger, an increasing number of individuals and institutions looked to accountants to provide economic information about these enterprises. For e.g. Prospective investors and creditors sought information about a corporation’s financial status. Government agencies required financial information for purposes of taxation and regulation. Thus accounting began to expand its function of meeting the needs of 4

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