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MGT 101 Additional Basic Concepts Useful

This document provides an overview of transactions, bookkeeping, accounting, and the differences between single-entry and double-entry accounting systems. It defines a transaction as a financial activity between two parties that involves an exchange of goods, services, or future payment. Bookkeeping is described as the systematic recording of financial transactions, while accounting provides summarized financial data and reflects the overall financial performance and position of a business. The document outlines the objectives and users of accounting information and highlights advantages such as reduced errors and fraud with double-entry accounting compared to single-entry accounting.

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Mir Fida Nadeem
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© © All Rights Reserved
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Download as PPT, PDF, TXT or read online on Scribd
10 views

MGT 101 Additional Basic Concepts Useful

This document provides an overview of transactions, bookkeeping, accounting, and the differences between single-entry and double-entry accounting systems. It defines a transaction as a financial activity between two parties that involves an exchange of goods, services, or future payment. Bookkeeping is described as the systematic recording of financial transactions, while accounting provides summarized financial data and reflects the overall financial performance and position of a business. The document outlines the objectives and users of accounting information and highlights advantages such as reduced errors and fraud with double-entry accounting compared to single-entry accounting.

Uploaded by

Mir Fida Nadeem
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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MGT-101

Financial Accounting

Additional
Material-Lecture 2

What is a transaction?
1.

Transaction:
Financial activity or event
two parties
Exchange of some goods or services
For cash/ money or a promise of future
payment

Features of transaction

Between two parties


Measurable in terms of money
Transfer of property or service
Affects the financial position of a business

What is BOOK KEEPING?


2. Book keeping:
Part of accounting
Systematic recording financial
transactions
OR
Art of recording business transactions in
Presentation
Title
Presentation
the books of accounts in systematic Title
manner

OBJECTIVES OF BOOK-KEEPING

Provides financial data to management


Provides a systematic record
Keeps permanent record
Provides details of each transaction
Reflects the financial performance of a
business.

OBJECTIVES OF ACCOUNTING
1.

Primary:
Maintenance of records
Profit or loss calculation
Financial position reflection
Provide information to its users

Cont
2. Secondary:
Tax calculation & payment
Provides evidence to prevent disputes
Extracts correct & valid information
Verification and counter check of cash
Helps in future planning

USERS OF ACCOUNTING
INFORMATION
Internal Users

External Users

Owners

Labor unions

Managers

Financial analysis

Employees

Stock Exchange
Supplier
Regulatory authorities
Customers
Financial press/media
Trade associations
Tax Authority
Creditor/ investors

BOOK KEEPING VS. ACCOUNTING


BOOK KEEPING

ACCOUNTING

Nature and scope of work


Recording phase of an accounting system
& basis of accounting

Summarizing phase of an accounting


system & basis of business decisions.

Skill
Does not require any special skill or
knowledge

Requires special skill and knowledge and


personal judgment

Financial Statement
Not prepared from book keeping record.

Prepared from accounting record.

Financial conditions
Cannot give the complete and clear picture
of the financial condition of business.

Shows complete and clear picture of the


financial condition of business.

Legality
Cannot help in complying with legal

can be complied with the help of

SINGLE ENTRY VS. DOUBLE ENTRY


SINGLE ENTRY

DOUBLE ENTRY

incomplete records (cash transactions


only)

complete records (cash & Credit


transactions)

statement of profit and loss in prepared to


calculate profit

trading and profit & loss is prepared in


order to ascertained the profit & Loss of
business.

statement of affairs is maintained

balance sheet is prepared.

Two aspects of a transaction is not


recorded
adopted by small scale business.

Presentation
two fold aspects of each and
Title
every
Presentation
Title
transaction is recorded.
adopted by large scale business.

DISADVANTAGES of Single entry


book keeping
Frauds and mistakes are difficult to detect
Partial and incomplete records are
maintained
Balance sheet is not possible to prepare
Nominal accounts & profit and loss
account cannot be prepared.
Accurate trial balance cannot be drawn

ADVANTAGES OF DOUBLE ENTRY


SYSTEM

Balanced trial balance


Accurate net profit and loss
Accurate balance sheet
Less chances of fraud
Easy detection of errors, omissions & fraud
Helps in the valuations of business
Helps in managing & supervising business
activities
Reflects true financial position of a business.


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