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Accounting For Managers

Accounting For Managers. Objectives. Finance is the back bone of any organization Every business man is interested to know the income and expenditure of the organization as well the financial health of the firm.

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Accounting For Managers

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  1. Accounting For Managers

  2. Objectives • Finance is the back bone of any organization • Every business man is interested to know the income and expenditure of the organization as well the financial health of the firm. • Here in this course we will learn about the collection of the financial data, classifying the data and extract the valuable information from the data

  3. The information will be useful for internal and external parties of the organization. • We can take the better decision in the light of related information.

  4. Definition of Accounting “The art of recording , classifying and summarizing in a significant manner and in the terms of money transactions and events which are, in part at least , of financial character , and interpreting the result thereof” -The American Institute of Certified Public Accounts-

  5. “Accounting is the process of identifying, measuring and communicating economic information to permit, informed judgments and decisions by user of the information” The American Accounting Association

  6. “Accounting is a service activity. Its function is to provide quantitative information ,primarily financial in nature, and about economic activities , that is intended to be useful in making economic decision” AICPA of US

  7. Main function of a manager?

  8. Decision Making

  9. Financial Accounting–Evolution • Evidence of recording of economic transactions in ancient civilizations • Franciscan Monk FraLuca Pacioli(1445-1515) known as the father of modern accounting • His Summa de Arithmetica, Geometria, Proportioniet , is considered as the first text on accounting

  10. Accountant as a historian –keeps records But with a difference ->Respects the facts ->Bring into focus all known and knowable relevant facts ->Finally, provide an interpretation of the history proposed

  11. Product of economic environment • Gradually evolved as a profession with the development of economic activity • especially …Industrial Revolution • Scope and nature of accounting is closely associated with the gradual changes in the field of organization and management of organizations • In the modern IT era, accounting is getting integrated into software packages and constantly adapting itself

  12. The Need For Accounting Let us suppose you have a small book store. You have sold some books to your customer, say, X, who has given you the full amount in return. This is a transaction that took place between you and X. Now, suppose you deposit all the money received from X in the bank. This is another transaction, between you and the bank. You can very easily remember these transactions and need not write them anywhere. But, what if there were a large number of customers, say 100 or even more and most of them have not given you the full amount due ? This is what really happens in a business. In such a case, you will have to memorize all the details regarding each and every customer i.e. details of the amount received from them, the amount due from them etc. which is nearly impossible for anybody. So, what you can do is to prepare an account of each and every customer in order to record the details of the transactions with them. This means you have to prepare a large number of accounts i.e one account for each customer. • For example, suppose you have sold books worth Rs.100 to X and books worth Rs.1000 to Y. X has given you only Rs.50 and Y has given you Rs.750. To remember the balance due from X and Y, you can record these transactions by preparing X's Account, Y's Account as well as your own Cash Account.

  13. Objectives of Accounting • Income determination For rational economic decision-making • Financial reporting Summarized as all those things of value owned by the entity and all the claims against these possessions • Disclosure All the relevant & pertinent information is supplied to the information users

  14. Purposes Of Accounting Information

  15. Accounting & Management Control • Control means the process of keeping the organization in course 􀂄This involves measurement through the control system 􀂄The controller (accountant) and managers obtain information, which enables them to diagnose the situation

  16. Accounting Information users • Stakeholders are the ones who have an interest in what happens as a result of the entities activities • Stakeholders classified as 􀂄Internal users viz. managers 􀂄External users viz. creditors and equity investors, government, society

  17. Parties Interested in Companies

  18. Types of Accounts

  19. limited liability • The defining feature of a corporation is its legal independence from the people who create it. If a corporation fails, shareholders normally only stand to lose their investment (and possibly, in the unusual case where the shares are not fully paid up, any amount outstanding on them - and not even that in the case of a No liability company), and employees will lose their jobs, but neither will be further liable for debts that remain owing to the corporation's creditors unless they have separately varied this, e.g. with personal guarantees. This rule is called limited liability

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