Entire Fundamentals of Book Keeping.pptx

Entire Fundamentals of Book Keeping.pptx

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  Principles of Accounting Fundamentalsof Book Keeping Presented By Dr.T.Kanimozhi Assistant Professor PG and Research Department of International Business Sri Ramakrishna College of Arts & Science
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  Fundamentals of BookKeeping Accounting is the procedure of data entry, recording, summarizing, analyzing, and then reporting the data related to financial transactions of businesses and corporations. Fundamentals of accounting are guiding principles to perform such tasks. Operations of a business entity over an accounting period, generally a year, are keys to prepare financial statements.
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  Process of BookKeeping
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  Kinds of FinancialStatements
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  Basic Accounting andBookkeeping Principles Defined • Every small business owner should have at least some understanding of daily record-keeping practices and principles. • Here are some of the basic accounting and bookkeeping principles defined in simple terms.
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  Accounting Methods: Cashvs. Accrual • With the cash basis of accounting, income is recorded when it’s received, and expenses are recorded as they’re paid. The cash method does not take into account any accounts receivable or accounts payable. It strictly applies to payments from clients or sales once you receive the cash in- hand and when an expense clears your bank account. • Accrual accounting is completely different from cash accounting. Instead of recording income and expenses as they clear your bank, you record them as the income is earned and the expenses are billed. The accrual method does take into account accounts payable and receivable.
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  Accounts Payable • Accountspayable relates to money that you owe suupliers and creditors. These are accounts you’re expected to pay for purchases owed, and they are considered liabilities.
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  Accounts Receivable • Accountsreceivable is money you’re expecting from clients and customers for services rendered or products sold. These are funds you’re expecting to receive for work performed or products sold, and they are considered assets.
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  Journal Entries • Asyou pay for business expenses and receive income, you should create journal entries in your bookkeeping software to keep track of everything and to make sure your books stay balanced. This gives you an accurate picture of your revenue and costs, so you can produce financial reports.
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  Assets • All ofthe money in your deposit accounts and investments, plus the value of your home, furnishings, vehicles and other valuable belongings are considered assets. This includes products purchased for inventory, office furniture, art and anything else that’s of value.
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  Bookkeeping Systems: Single-Entryvs. Double-Entry • The single- and double-entry bookkeeping methods are the ones most commonly used within small businesses. Your personal bank account uses the single-entry method, with debits and credits recorded as your balance increases and decreases. It tells you how much money you have in the bank, but it doesn’t account for where your money’s going in the future. • The double-entry method, on the other hand, records your expenses and accounts in the appropriate categories. It tells you how much you’re spending on a particular expense category and tracks future spending. The double-entry bookkeeping method is the most common strategy used by accounting software, large corporations and CPAs.
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  Balance Sheet • Abalance sheet is a snapshot of a company’s financial standing at the end of a specific period. It contains a statement of the liabilities, assets, income, expenses and capital owned by the business. A balance sheet is usually produced at the end of every month and every quarter.
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  Capital: Debt vs.Equity • The cash you have in your accounts plus all of your assets and investments are known in business finance terms as capital. The two major types of capital are debt and equity. • Debt involves borrowed funds that are expected to be repaid from loans or other financing options. Equity relates to selling off interest in the company in exchange for money, and it is viewed as an investment in the business.
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  • Cash Flow •Cash flow represents both money coming in and going out of your business accounts. There are different types of cash flow, including operational, investment and financing. Without a good amount of cash flow, your business will fail. • Debits and Credits • When using the double-entry bookkeeping method, your debits and credits always cancel each other out. You debit your expense account and credit your bank or other cash account. For example, if you purchased $125 worth of shipping and office supplies, you should debit the shipping category $100 and debit $25 to the office supplies category, and then you should credit your bank account $125.
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  • Liabilities • Aliability is anything that relates to a debt or financial obligation. It is recorded on your company’s balance sheet. This includes accounts payable, income taxes, wages and other accounts owed. • Profit and Loss • An income statement, also known as a profit and loss statement, summarises the business income, expenses and total cost during a specific period of time. It shows the profit that the business earned during this time as well as the loss incurred, and it gives a positive or negative figure. • Understanding the basic vocabulary and principles of accounting will help you manage your books. Combine this knowledge with good accounting software and an accountant advisor, and your finances should be well taken care of.
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  Depreciation • The costbasis of physical assets with a large amount of value can be depreciated to capture the loss of value as it goes down over time. This applies to computers, furniture, machinery and equipment used to start and run a small business. • The formula for depreciation takes into account the useful life of the product, the salvage value and purchase price (or cost basis). • Depreciation = (asset purchase price – salvage value) / useful life.
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  Thank You