Accounting In Business

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Textbook

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See Wikipedia page on double entry book keeping

Additional References

How the topic is discussed in NCERT Books

NCERT Class XI has 'Financial Accounting - I' text book, which gives much more detailed explanation of Accounting. Chapter 1 provides an introduction to accountancy and chapter 2 discusses basic accounting concepts which is very much required to understand the subject. Chapter 3 and 4 discuss transaction recording in more detail. Chapter 6 discusses preparation of Trial Balance.

NCERT Class XI has 'Financial Accounting - II' discusses the preparation of financial statements over three chapters. Teachers will find reading the NCERT text book useful since it is discussed in far more detail with many examples for easier understanding

Click here for NCERT Accountancy text books

Useful websites

Wikipedia page on double entry book keeping gives a detailed explanation for this method. It includes solved examples of recording transactions using double entry method and preparation of the financial statements.

http://www.samarak.com/bookkeeping-center/bookkeeping-dictionary.html has a brief explanation for terms used in book keeping.

Reference Books

Tamil Nadu text book for Class XII gives a very good and detailed explanation about Book Keeping and Accounting.

Other popular authors in this topic include 1. R.L. Gupta – Principles and Practice of Accountancy 2. T.S.Grewal – Introduction to Accountancy

More advanced reading on financial accounting is available in 1. Jain & Narang – Financial Accounting. 2. R.L.Gupta, Radha Swamy – Financial Accounting.

Teaching Outlines

Please describe the key ideas to be conveyed in this section. Also broken down in details by each idea

Key Idea #1 Introduction to Accounting

Learning objectives

What is the aim/purpose of accounting/ accountancy?

Notes for teachers

Accounting is a formal method of recording the monetary/financial aspects of business transactions. Transactions that have no pecuniary (monetary) impact are not considered in accounting, such as the marriage of the owner or employee.

Any transaction that has a monetary impact will be recorded, such as a wedding loan given to employee. Book keeping is the first part of accounting, which is concerned with the maintenance of the 'books of accounts'. Books of accounts comprise of book of original entry (Journal) and the ledger. Journal is maintained date wise and from Journal, party wise records are created in the ledger.

Double entry book keeping is the most widely used system of book keeping.

At the end of a financial period (usually a year), the business or institution is required by law to prepare the 'financial statements' (comprising the Profit and Loss statement for a business and an Income and Expenditure Account for a non-profit body, as well as a Balance Sheet). This gives the reader an idea of the financial status of the entity.

Activity No # 1 - Exploring simple financial records maintained at home

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In some homes, parents may be maintaining a record of household expenses. Ask the student to bring an old record from a previous month for discussions in the class. Or your own record can be shared and discussed, if you maintain

• Estimated Time - 1 period for discussions

• Materials/ Resources needed - Register / record of expenses maintained at home

• Prerequisites/Instructions, if any - Discussing how accounting (keeping records of monetary transactions)is a very old and also a common practice. Simplest records are of household expenses.

• Multimedia resources

Short video which shows how we can use a spreadsheet (Video shows Excel, but same can be done with LibreOffice also) to keep a record of monthly expenses.

• Relevant local connections - people, places and materials
• Website interactives/ links

• Process - Even at home, your parents may be maintaining a simple record of expenses by date. The total of expenses may be calculated each month, to keep a track against the income (which may be a monthly income)

• What questions can you ask

- Why is such a record being maintained at home? - How often is it recorded? - What kind of expenses are most common during the month?Which are heavy expenses?

• Assessments - incorporating elements of CCE

-Why is double entry system not maintained for home expense recording

• Question Corner

Activity No # 2 - Visit to local business / shop

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A visit can be planned and made to a local business which maintains it accounts under the double entry book keeping system. If such an entity is not easy to access, then a visit to the local shop can be planned, to discuss and understand from the shopkeeper how she/he maintains the records of expenditure and incomes

• Estimated Time - 1/2 day
• Materials/ Resources needed

Pen, paper

• Prerequisites/Instructions, if any

all those related to managing an excursion

• Multimedia resources

• Relevant local connections - people, places and materials

this is a visit to the local business/shop so links students to local institutions

• Website interactives/ links

• Process

Visit the shop with a set of questions relating to the maintenance of financial records. A smaller team can discuss and others can observe (asking additional questions if needed)

• What questions can you ask

How do you maintain records of income and expenditure How do you preserve records Do you need to show your records to anyone

• Assessments - incorporating elements of CCE

Why does a local shop keeper not maintain records under double entry book keeping system

• Question Corner

Key Idea # 2 Types and examples of 'account heads'

What are the key ideas to be covered Accountancy is the maintenance of financial records. These need to be systematically maintained with least subjectivity (since objectivity is necessary for easy common understanding).This requires clear definition of accounting heads as well as types of accounts.

Learning objectives

To understand what an 'account head' is To understand what are the kinds of 'account heads'

Notes for teachers

The fundamental 'unit' of accounting is an 'account head'- also called 'head of account' or 'line item'. This is nothing but the label / name for which the financial transaction is incurred. For example if a teacher purchases books, the account heads are 'books' and 'cash' (which is paid in exchange or books)

Each transaction can have 2 or more account heads. Each account can be one of three types - personal (of persons),real (assets and liabilities) and nominal (expenses and incomes).

Activity No # 1 - List popular / commonly used account heads

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The information can be collected from different sources - financial statements / annual reports of companies, newspapers, magazines as well as from the Internet

• Estimated Time - one period
• Materials/ Resources needed - annual report/magazines/newspapers

• Prerequisites/Instructions, if any - Introduction to accountancy (background/purpose) must be complete

• Multimedia resources

• Relevant local connections - people, places and materials

• Website interactives/ links

Internet search for company annual reports

• Process

Ask students to look through these resources and make a list of popular account heads. Let them identify the account type (personal/real/nominal)for each account and give their reasons

• What questions can you ask

Which kind of accounts (personal/real/nominal) are more common in company balance sheets? Is there any pattern?

• Assessments - incorporating elements of CCE

*Question Corner

Key Idea # Accountancy is also a public service

What are the key ideas to be covered While all business entities need to maintain books of accounts, accounting information is not merely for the owners of the business. The information is useful for a variety of actors - employees, customers, creditors/lenders, government, tax and revenue authorities and even the public at large. Hence Accountancy is an important public service.

Learning objectives

Understand the nature of accountancy as a larger public service

Notes for teachers

In India financial accounting (and audit)is an important profession. The 'Institute of Chartered Accountants of India' monitors and supports the development of the accountancy and audit profession. India has the largest number of public accountants (called Chartered Accountants) in the world, numbering around 300,000.

Public audit bodies such as the 'Auditor General (AG)' audit the financial records and support the transparency and integrity of public activities and investments/expenditure

Activity No # 1 - Debate/discussions on 'who needs accountancy'

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Discussions among a group of students/teachers on who all need accountancy and why?

• Estimated Time -one period

• Materials/ Resources needed

Paper,pen

• Prerequisites/Instructions, if any

• Multimedia resources

• Relevant local connections - people, places and materials

• Website interactives/ links

• Process

Different groups/teams of students can don the role of different actors and think and share why they need accountancy. Other students can add/probe/question/debate. One set of students can make a record of discussion highlights and share

• What questions can you ask

Why is accountancy a popular profession? How are your school financial records maintained?

• Assessments - incorporating elements of CCE

Is accountancy of importance to the community?

• Question Corner

Activity No # 2 - Accounting practices issues

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Accountancy is the main system of understanding the performance of a business. The use of standards, principles, conventions/assumptions and concepts is to help all actors to get a common understanding of the performance and even potential of a business. However,there are also dangers from misuse of the accounting processes resulting in misrepresentation - intended or unintentional which can fool those outside the entity. In India,the famous recent such case is that of Satyam Computers,where the company management created false records of revenues and false debtor records to boost profits.

Students can discuss the accounting concepts/conventions/assumptions to see how they can be violated / misused to commit fraud. Also what measures can be adopted to prevent or trace such activities.

• Estimated Time

1 period

• Materials/ Resources needed

• Prerequisites/Instructions, if any

• Multimedia resources

• Relevant local connections - people, places and materials

• Website interactives/ links

Wikipedia page on big accounting scandals across the world

• Process

Discussion on the accounting concepts and how they can be mis-interpreted to mis-represent information of the entity

• What questions can you ask

• Assessments - incorporating elements of CCE

• Question Corner

What are the methods to detect accounting mistakes /errors / frauds? Are there any patterns in the frauds committed by falsifying accounting records?

Project Ideas

1. Some students may be getting 'pocket money' from their parents (for taking care of their personal expenditure on travel,books etc). Such students can be asked to maintain their expenditure record in a spreadsheet on a computer (or in a diary).

At the end of a month, the class can discuss the expenses incurred by the student.

2. Discussing the household monthly expenditure of a family Students can do a project to identify the key expenses of their family/household over a month. They can present the expenditure in the form of a pie chart, using the LibreOffice calc - CHART function

Video on creating a pie chart using a spreadsheet (the video uses 'number of staff by region', you could do it with 'amount of expenditure by account head'

Community Based Project

1. Accountancy is a very old profession. Speak to your grandparents or older people in your village / town to find out how they would maintain information about their incomes/expenses, receipts/payments.

2. Community audit or social audit is becoming an important idea. In Rajasthan, expenditure incurred by the Grama Panchayat has to be audited by the community. See a video in hindi on social audit of NREGA in Rajasthan