1. CPTSuccess Revision Notes – Fundamentals of Accounting Chapter 1. Accounting an Introduction Unit 1: Meaning and Scope of Accounting

2. Chapter 1. Accounting an Introduction Unit 1: Meaning and Scope of Accounting Transaction denotes “a business, performance of an act, an agreement”, while Event is used to mean “a happening, as a consequence of a transaction, a result”. Events are the end results of transactions Accounting is defined as the art of recording, classifying, summarizing, analyzing, interpreting and communicating the results of transactions and events which are of financial character. Hence, it includes preparation of final accounts, ascertainment of profit or loss and its communication to users. © Revision Notes - Fundamentals of Accounting CPTSuccess www.cptsuccess.com

4. Recording – i.e. making journal entries

5. Classifying – i.e. under different accounts in Ledger

6. Summarizing – preparation of trial balance, P&L account, Balance sheet and Cash flow statement

7. Analyzing

8. Interpreting

9. Communicating

10. Using the financial information

11. Internal users – Board of directors, Partners, Managers, Officers

12. External users – Investors, Lenders, Suppliers, Government agencies, Employees and Customers© Revision Notes - Fundamentals of Accounting CPTSuccess www.cptsuccess.com

14. Posting to ledger

15. Preparation of trial balance

16. Preparation of final accountsManagement accounting is concerned with internal reporting to the managers of a business unit. The different ways of grouping information and preparing reports as desired by managers for discharging their functions are referred to as management accounting. It is not accounting for future, although it is based on historical data © Revision Notes - Fundamentals of Accounting CPTSuccess www.cptsuccess.com

18. Systematic recording of transactions – Book keeping i.e. journal, ledger and trial balance

19. Ascertainment of results of above recorded transactions – making Manufacturing, Trading and P&L account

20. Ascertainment of financial position of the business – making balance sheet

21. Providing information to the users for rational decision making – preparing financial reports

22. To know the solvency position – through balance sheet© Revision Notes - Fundamentals of Accounting CPTSuccess www.cptsuccess.com

24. Functions of Accounting are as follows:

25. Measurement of past performance

26. Forecastingfuture performance

27. Decision making by providing relevant information to the users of accounts

28. Comparison and Evaluation through assessing performance and evaluating financial results

29. Control by identifying weaknesses of operational system and providing feedback

30. Government regulation and taxation by providing necessary information© Revision Notes - Fundamentals of Accounting CPTSuccess www.cptsuccess.com

33. Financial accounting

34. Management accounting

35. Cost accounting

36. Social responsibility accounting

37. Human resource accounting© Revision Notes - Fundamentals of Accounting CPTSuccess www.cptsuccess.com

39. Maintenance of books of accounts

40. Statutory audit

41. Internal audit

42. Taxation

43. Management accounting and consultancy services

44. Financial advice – Investments, Insurance, Business expansion, investigations, pension schemes

45. Other services – secretarial work, share registration, company formation, receiverships, liquidation, arbitration, accountant and information services, cost accounting.© Revision Notes - Fundamentals of Accounting CPTSuccess www.cptsuccess.com

46. CPTSuccess