PROJECT ON FINANCIAL ACCOUNTING

1. PROJECT ON FINANCIAL ACCOUNTING

2. Content: • Meaning • Objectives • Advantages • Limitations • Users of financial accounting • Basis of accounting • Reference

3. MEANINING: Accounting as the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof. Accounting as an information system collects and communicates economic information about an enterprise to a wide variety of interested parties.

4. OBJECTIVES: • To Maintain the Records of Business Transactions: Financial Accounting records all the monetary events related to business in a systematic manner. • To Calculate of Profit and Loss: Financial Accounting helps to calculate the end result of business through profit and loss account. • To know the Financial Position of business: Financial accounting records all the values of assets and liabilities through which we can measure the financial position of the business.

5. 4. To Provide Accounting Information to its Users: Financial Accounting provides all the necessary information related to business to its different users which helps them to make any particular decision. 5. To protect business properties: Financial Accounting keeps the proper records of all the Assets of the business which leads to protect the properties of the business. 6. To facilitate rational decision making: Through Financial Accounting the users who involve with the business can make rational decision by using recorded data.

6. ADVANTAGES: • Helps in recording the business transaction: As human memory is limited. Financial Accounting helps to record all the business transaction. • Calculate the result of operation: Financial Accounting helps to calculate the profit or loss of the business at the end of the year. • Know the financial position of the business: Financial position is calculated through the assets and liabilities of the business. Balance sheet is prepared to record all the values of assets and liabilities.

7. 4. Helps in decision making process: Financial Accounting provides all the necessary information to its different users. Using these information they can make any further decision. 5. Valuation of assets and liabilities of the business: Financial Accounting helps to calculate the values different assets and liabilities of the business. Balance sheet is prepared at the end of the accounting period to record the values of assets and liabilities.

8. LIMITATIONS: • Financial accounting permits alternative treatments: in some cases financial accounting follows alternative methods which may create problem for the proper valuation of such items. • Financial accounting influenced by personal judgments: it is influenced by personal judgments. For example valuation depreciation the method will be adopted is selected by the business concern. • Financial accounting ignores important non-monetary transaction: it does not records non-monetary events. The non-monetary events are very important for the growth of business.

9. 4. Financial accounting does not provide timely information: the final accounts are prepared only at the end the accounting period, which means for the result and position of the business the users have to wait till the end date of the period 5. Financial accounting doesn't disclose the present values: financial accounting follows historical concept while recording the values of assets. Assets of the business are recorded on acquired valued not on the present values.

10. User’s of Accounting EXTERNAL USERS INTERNAL USERS

11. Accounting is a means by which necessary financial information about business enterprise is communicated and is also called the language of business. Many users need financial information in order to make important decisions. These users can be divided into two broad categories: internal users and external users. Internal users include: owner, Management, Employees etc, and External users include: present and potential Investors, Creditors, Government, research scholars etc.

12. Internal users: • Owners: to know the happenings of the business, the result of business i.e., profit or Loss, and the values of Assets and Liabilities of the business etc. • Management: they need the information to make further decisions related to business. • Employee groups: information on the stability, profitability and distribution of wealth within the business;

13. External Users: • Investors and potential investors-information on the risks and returns on investments; • Creditors-information on whether amounts owed will be repaid when due, and on the continued existence of the business; • Customers-information on the continued existence of the business and thus the probability of a continued supply of products, parts and after sales service; • Government and other regulators- information on the allocation of resources and the compliance to regulations; taxes, fines etc.

14. BASIS OF ACCOUNTING: 1. Cash basis: only cash transactions are recorded under cash basis of accounting. Cash receipts and cash payments are recorded. Credit transactions are not recorded at all and are ignored till the cash is actually received or paid. Cash book, Receipt and payment A/c are prepared under cash basis of accounting. 2. Accrual basis: under this system all transactions both cash as well as credit relating to a particular period recording in the books of accounts.

15. Reference: • Jain S.P.: “ADVANCE ACCOUNTANCY VOL- I • KALYANI PUBLISHERS- NEW DELHI- 2007 • 2. DAM B.B. • GAUTAM H.C.: “ACCOUNTANCY” • CAPITAL PUBLISHING COMPANY- GUWAHATI- 2009 • 3. Tulsian P.C. • Tulsian S.D.: Accountancy for Class XI • S. CHAND AND COMPANY LTD.- NEW DELHI- 2011