Page 9 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes 1.2.2 Accrual System
The revenues are recognized only at the time of occurrence and expenses are recognized only at
the moment of incurring.
Whether the cash is received or not out of the sales, that will be registered/counted as total value
of the sales.

The next most important step is to record the transactions. For recording, the value of the
transaction is inevitable, to record values, the classification of values must be essentially done.

1.2.3 Values

There are four different values in the business practices that should be followed or recorded in
the system of accounting:
1. Original Value: It is the value of the asset only at the moment of purchase or acquisition
2. 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
3. Realizable Value: Value at which the assets are realized

4. Present Value: Market value of the asset

Notes Classifying: It is one of the most important processes of the accounting. Under this,
grouping of transactions is carried out on the basis of certain segments or divisions. It can
be described as a method of rational segregation of the transactions. The segregation is
generally done into two categories, viz.
1. Cash transactions, and
2. Non-cash transactions.

The preparation of the ledger A/cs and Subsidiary books are prepared on the basis of
rational segregation of accounting transactions. For eg, the preparation of cash book is
involved in the unification of cash transactions.
Summarizing: The ledger books are appropriately balanced and listed one after another.
The list of the name of the various ledger book A/cs and their accounting balances is
known as Trial Balance. The trial balance is summary of all unadjusted name of the accounts
and their balances.

Preparation: After preparing, the summary of various unadjusted A/cs are required to
adjust to the tune of adjustment entries which were not taken into consideration at the
time of preparing the trial balance. Immediately after the incorporation of adjustments,
the final statement is readily available for interpretations.

Did u know? What are the purposes of preparing financial statements?
1. Accounting provides necessary information for decisions to be taken initially and it
facilitates the enterprise to pave way for the implementation of actions.
2. It exhibits the financial track path and the position of the organization.

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