Take CA Coaching from the Best Tutors

  • Affordable fees
  • 1-1 or Group class
  • Flexible Timings
  • Verified Tutors

Fundamentals Of Accounting

CA Prashanth Reddy
25/05/2017 0 2

Every Individual performs some kind of economic activity. All the economic activities are run for an individual benefit and may create social benefit, an i.e. benefit for the public at large.

For eg, A Salaried person gets salary and spends to buy clothing, for children’s education, construction of the house, etc.

Such economic activities are performed through “transactions and events”.

Transaction = a business, performance of an act, an agreement.

Event = a happening, a result, an outcome

  • An individual invests Rs. 200,000 for running a stationery business. On 1st April, he purchases goods for Rs. 115,000 and sells for Rs. 147,000 during this month. He pays a shop to rent for the month of Rs. 5,000 and finds that he has goods worth Rs. 15,000 in hand. The individual performs an economic

In this e.g., Earning of Rs. 42,000 surplus is an event, also having stock in hand is another event, Purchase and Sale of goods, investment of money and payment of rent are transactions.

Stock in Hand- Rs. 15,000 &

Surplus = 147,000 + 15,000 – 115,000 – 5,000 = Rs.  42,000

The Committee on Terminology set up by the American Institute of Certified Public Accountants formulated the following definition of accounting in  1961:

“Accounting is the art of recording, classifying, and summarising in a significant manner and in terms of money, transactions and events which are, in part at least, of  a  financial  character,  and interpreting the result thereof.”



Accounting is the process of

  • Identifying
  • Measuring
  • Communicating

Accounting information to permit informed judgements and decisions by the users of accounting.

Accountancy: Accountancy refers to SYSTEMATIC KNOWLEDGE OF ACCOUNTING. It explains why to do and how to do various aspects of accounting.

Book-Keeping: Cycle: Book-Keeping is a PART OF ACCOUNTING and is concerned with Maintenance Of Books Of Accounts.

 AccoCycle: Begins with the recording of transactions and Ends with preparation of final accounts

Users of Accounting:

Internal users: management and employees

External users: creditors, customers, govt, public etc

Objectives And Functions Of Accounting


  • To ascertain the FINANCIAL PERFORMANCE
  • To COMMUNICATE information to users


  • Measurement
  • Forecasting
  • Decision Making
  • Comparison and Evaluation
  • Control
  • Government Regulation and Taxation

Advantages & Limitations Of Accounting:


  • Facilitates the maintenance of systematic records.
  • Facilitates the ascertainment of financial performance.
  • Facilitates the ascertainment of financial position.
  • Facilitates the communication of information to users.
  • Facilitates the compliance with legal requirements.
  • Facilitates the Control Over Assets.
  • Assists The Management.


  • Ignores qualitative (Non-Monetary terms)
  • Not free from bias.
  • Ignores the price level
  • The danger of window dressing.
0 Dislike
Follow 4

Please Enter a comment



VIJAY | 09/04/2017

Thank you very much Sir

0 0

Anjali | 30/03/2017

Thank you very much Prashanth Reddy sir

2 0

Other Lessons for You

For IIT/NEET Aspirants Class 12 Chemistry - Thermodynamics For a Cyclic Process.
In a cyclic process,the system starts and returns to the same thermodynanic state.The total internal - energy change in any cyclic process is zero. The net work involved is the enclosed area on the P...

Business Finance Class 12 (CBSE)
Class 12 - CBSE - Business Finance

Easy Way For Chemistry
Chemistry is not that tough how much we are assuming. I heard from so many that sir, chemistry is all about remembering. But its not like that. Ex:- you can remember the elements name like this. hai...

Introduction To Accounting: Part 7: Accounting Principles
Just like we have Grammar in English Language, which is basically the rules of English, we have some rules for Accounting as well, known as Accounting Principles. Accounting Principles, Concepts and Conventions...

Biology: Nervous system
The nervous system coordinates the actions of complex organisms via the transmission of electrochemical signals: These signals are transmitted by a specialised network of cells called neurons. The...

Sayma S.

2 0

Looking for CA Coaching classes?

Learn from Best Tutors on UrbanPro.

Are you a Tutor or Training Institute?

Join UrbanPro Today to find students near you

Looking for CA Coaching Classes?

The best tutors for CA Coaching Classes are on UrbanPro

  • Select the best Tutor
  • Book & Attend a Free Demo
  • Pay and start Learning

Take CA Coaching with the Best Tutors

The best Tutors for CA Coaching Classes are on UrbanPro

Book a Free Demo

This website uses cookies

We use cookies to improve user experience. Choose what cookies you allow us to use. You can read more about our Cookie Policy in our Privacy Policy

Accept All
Decline All

UrbanPro.com is India's largest network of most trusted tutors and institutes. Over 55 lakh students rely on UrbanPro.com, to fulfill their learning requirements across 1,000+ categories. Using UrbanPro.com, parents, and students can compare multiple Tutors and Institutes and choose the one that best suits their requirements. More than 7.5 lakh verified Tutors and Institutes are helping millions of students every day and growing their tutoring business on UrbanPro.com. Whether you are looking for a tutor to learn mathematics, a German language trainer to brush up your German language skills or an institute to upgrade your IT skills, we have got the best selection of Tutors and Training Institutes for you. Read more