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| Summarising , Analysing 4 | CHAPTER 1 THEORETICAL FRAMEWORK.” | i unlit deme Mennitny G 7 iN pescopp-oRyAeouNT ING Helinition Of dccounting Aaording to American Institute of ce tified palblic Accountants L of recording classify ing, CAIEPAD 19 1961 “Accounting 1s the 1 LEMS OF MONEY | and Suramar si ng iN & signifi cant pyanney and ir Hransattions and events osbich ane 19 pant of Least of a ficancel dhonactey % interpreting the vesult vioh, Una eae RE Meaning THON SALEIOD :- performance of an Act B Event :. Result of the activity £16 the process oF necording , Classifying, 3) Accounting - | iHkeY PACKING Singnual t¥e0SAct ons the sesulks to interested persons . en FeniiasyohAcioun sg 1) Systematic aecovoling of tVANSALTOY 2) Ascertainment of results CP Late] 3 ascertainment of financial position [els] the Users foy Yational Alecisino making 4) Provioling information to 5) To know the Solvency Position. | Paocedlures of accountog = ptvided into 2 D cwnevating financial information - ay Recording byclassifying OCSummoanrising a) Analysing £) Interpreting f) Communicating | 2) Using the financial intormadion. | functions of accounting 11) Measunennent : - Helps to measure the performance ¢ Ainanceal postion of the enteypause. . 2) F071 COSIOG 1- Helps im Forecasting fulure performance 4 feancal pests \) Using Past Adta % Analysing trends © : 4 ) 3) Deu'Sion maxing :- Various clecision vequives 11 ee : quires time Covvect i “ie which is provided by aciounts Ly % ect informadio 3) 4) Evaluation .. cvaluskion of 09 enterprise s PeAroIMance % Peace health ig done from accounting data 4) Mau\Org 25 dhe moaney of Shane holler / of 5) Stewourdship .- the manage ment, behalf. owners, on their objectives of book Keeping a mpyding of tvansattons :- 6) eas ae 1) Complete xe | 4 on the (ae Meare al et fect i ( ainment of financial effect onthe ~ combined effect of all 4a! ‘ 0) Pscert pus AES ction , i Usevs of accounting, (olor soakiom : Pa, inotiner they os Roll | . Je i -to AL eyeMAe VNeTD® : lovestors :- fofermasion RS | 4 bold, or sell the ghones eter bo a SSes5 oe ability QS 2) fEroployees * - Ioformadion Anat enables treo _ ee | of the enterprise. to PYovide senuceicneo ane aM 3) Ly) | employment opportunities . Aetoyantoe, whet, 59 3) Lenders. Informative that enables them | theinaso loans % Hoe interest theveo, vill Be pad uilsen Gute - 6) 4) Suppliers /eveditors :- enables Unern to Arterenine calreloe? ae OM: Owing to thers wail be Paid uahen due - ‘ = pebbors S) Customers! \nforxrnadion albout the Continuan especially when they hove a Long term iquolvernent Yor on the enterprise. ce OF ON ankev prise th oy On pest aA £ oe Vy Or Ne, the activities of enterparses 40 wollan 3 6) Govt. 4 Yequlate Hass oF national income and = taxation policies and as the | Statishes . | +) Public s— lef about the trends % | Prosperity of the anterypmrse % the ange of | ) Ble dives financial position only the day its prepanad ¢ne' future . 2) !9n07 Inflation. 3) Ignores Noo- monetary items Li , I 5 : ? loyalty ete: Kt huron N) Ceylon ems have to ‘be estimated (i 4 ko DPrOVI Cron” wy fal debts a ascent Clevelopmoemts inthe ies actiyctres = Z Rolemapaaeeountant. 1) maintaining books of ALLOURKS y 9) Statutory audit | 3) internal dudyt | gay Tentaction y 5) Calpsultancy SOaviee E)Fieantial advice on investment, insunance ete. ‘ ,- 1) Underst ability Ba On a) Cras) OF the ps i. dled im Fs is that re must be veaclly understandable by Users - ee, 4 Relevence s- To be useful, information noust be relevant the decrsron making needs Of Users . 3) Reliability Oe lO formation must Qhse be yelable , informatror has the Qualrty of veliabilitg when ib 1s free toe Moaterie eyror % bias. P ”) Corn ability s- Actounting information should have the Character sties of comparability ~ Pits IN 2 yl Ome Cogk + ~ » SE .- Any Change 16 value of asset Should be ecg ly eohen entity vealizes ib P Aosmm ASsSe! Lh uy et Ovnrh, Value rh change Aiea HOO golk Ham 309) “a ANS areel ory arnount Welord M2Iyby SO PN? Pay 1 AMeUHt = DUH ono] @)ypual aspect -- Every transattion hag busy aspeets (over Jo) Hombewatism . Anticipated future income. ts ine, future loss recognised. ny doasiglency.. Accounting policies Should be apples (pasistertly +o make frnancial Statement compan nble cant economic effect 2) Modkeviodr+y — {Lens bowing Sigoiti | Statement: on business Should only be disclosed io Financia [ ney effect Aatagnmy Brel Fs a Ayjo00| Colepend on ne "a Feipdlanerta. accounting Assumptions DS Going Concer 2) Consistent 2) erecuual underline the preparation & presentation of Fs > not Speci freally staked | —> But, disclosure ig necessary ,1f they One not followed [23 follow A 2 1ajprdlags oie +6 eh Follow nasgodley 26109 S754) CONVENTIONS ae | Entity Concepte:- Business enteyprse is separate #70” ie Bc | Owner. } : Meas | Money measurement: Transactions which car be in terms of money 1$ Only vecorded. 3) Pemiodicity. Accounts Should be prepared ot woe 4 Pevrod [1200) & mot of the end of entity Life. 4) Aceawual-. A\\ tvansactions ore recorded 95 % ushen Hey Occuy ivvepective of whether Cash is paid [vecei veal. | [eq:- APA Bomumren Salary Moy ooh, HapshrorHoeh _ ps shin date Moe Yecord NII AGW . Apyil wb Fecord 0.2190 J ] DH) oatelings,. Revenue 4 its aaloted ecpense Should be vecognised oY attounted in Same. period [Revenue aurora) Pemrmlese e2Cp- 20 Same peviod rh record D2IGHO- beq.- BOY arnployee Ors Dalyorrh PIB) rba~ IA Shey benefrt/ Revenue ancl Rar renter Reni MMeabaym Salary /expensers Sarre powod record 2/900 J G) Going Concer’. Entity rs assuned.to Continue to TES oper! for forseeable future G nelthey kas intention oy Nebessi ty t° liquidate / maternally veduce its chee of operaxion . D (0st Contept -- value of an asset ts found OUF on Ye bas of histovical Cost f atawigetion Cost [pay eaten) value mraw velord 2590s) i ; . : “¢ | Atcounting Policy MEA ng principle’ 4 = | Accounting Policy Aefers to Spebifi ; i methods of applying these pAindp | inthe Preparation and presentation fe) tes adopted PY” | ener =e £ finance oncepls, painepl me HI] H}; || Poles ene based 09 various aceoupting © 1 Conventions « | cl Areas wherein Afferent ¢ accounting poles GX. frequently encountered. ) Valuatron of Inventories - | 2) valuation of lnvestmencs Ht] i | Selection of Accounting Polreves based. Cie d to be Con sexvatsi + Have 1S posto pthere fs | | ') Paudence + An AlCountant 1% Suppose ig there fore expenses OY losses are paovided I} of (4s occurrence , Bub INcomMes GAL provided only | i] Cerkainty of its 2aanteg. ahe drangaction Should be YecHgniz: | | 2) Sabstane over forry*- of the transaction % DOE Mays fega| i | as per the economic yeality fO¥n: ie matenality s- In Unit 2 Change in, Altounting Polreves should be made in the following Londlrtions 4) IETS Yequived by Some Statute or for Compliance co th On Adee unting Standeaya. 2) change eed yesult in move appropriate presentadion of financial Statemene: iy ~ fore OF G-Leougt » id nEitication of angad 2) constitution of Study Qroup 3) pneparct'on OF daott % rks crveuladion doy pgeertoinerent oF veews of duffevent bodies OD aot 5) ppalicakion ob exposure draft (€ 0) G) Comments yeterved on exposume draft (ED) | 4) Modification of the. Asnatt- : g) 1Sue of AS ents} ohée "1 fy: UNIT6 CAPITAL ANH REVENUE expcnWe RE wen RCE REY eles [=a capital ependi i otpenalifune «Any expend uve. inuuyred t provide & benelit over a plong term period \S capital a PRPS © Cin fored astet also? a eee ot Vs. Capital expendituse 1S 1p inladance purpose af imeveasing the business. Alternatively, 4 Uxpenditure to veduuce tre EJ Purchase of ; eNase of machine, Cay, fuxoiture, CEC.
