Page 19 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes 1.7 Summary

Accounting is the process of recording, classifying, summarizing in a significant manner
of transactions which are in financial character and finally results are interpreted.

The revenues are recognized only at the moment of realization but the expenses are
recognized at the moment of payment.
The charges which were paid only are taken into consideration but the outstanding, not
yet paid is not considered.
The revenues are recognized only at the time of occurrence and expenses are recognized
only at the moment of incurring.
The financial statements are found to be more useful to many people immediately after
presentation only in order to study the financial status of the enterprise in the angle of
their own objectives.
The entire accounting system is governed by the practice of accountancy.

The accountancy is being practiced through the universal principles which are wholly led
by the concepts and conventions.
Money measurement concept tunes the system of accounting as fruitful in recording the
transactions and events of the enterprise only in terms of money.
Business entity concept treats the owner as totally a different entity from the business.
Going concern concept deals with the quality of long lasting status of the business enterprise
irrespective of the owners’ status, whether he is alive or not.
Matching concept only makes the entire accounting system as meaningful to determine
the volume of earnings or losses of the firm at every level of transaction.

Duality or Double entry accounting concept is the only concept which portrays the two
sides of a single transaction.

1.8 Keywords

Accounting Process: It includes the recording of financial transactions, ledger posting, preparation
of financial statements and analyzing and interpretation of them.
Accrual System: The revenues are recognized only at the time of occurrence and expenses are
recognized only at the moment of incurring.
Assets: The economic resources of an entity. They include such items as cash, accounts receivable
(amounts owed to a firm by its customers), inventories, land, buildings, equipment, and even
intangible assets like patents and other legal rights and claims. Assets are presumed to entail
probable future economic benefits to the owner.

Book Value: It is the value of the asset maintained in the books of the account. The book value of
the asset could be computed as follows:
Book Value = Gross (Original) value of the asset – Accumulated depreciation

Liabilities: Amounts owed to others relating to loans, extensions of credit, and other obligations
arising in the course of business.

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