Financial Accounting from Zero

The process of accounting has evolved in different parts of the world over the years and hence, varies widely depending upon the trade practices and customs prevailing in the regions. Even in the same region, the interpretation of the aspects by the recorder might differ. Result? Variation in reports. To usher in a measure of uniformity in the recording of transactions and their final interpretation, a number of conventions and doctrines were introduced. These doctrines and conventions acted as guidance to the accounting practitioners. Later, these were consolidated into Generally Accepted Accounting Principles (GAAP). The Great Depression of 1929, whose root cause was traced to anomaly in accounting norms, created the need to bring in an element of compulsion in accounting norms to be adopted by accountants. This has led the way for the introduction of Accounting Standards. With a view to ensure that managers do act in the interest of the shareholders rather than their own, principles of corporate governance have been built into the accounting standards.

This book covers these aspects in detail. The essence of maintaining accounts is to fulfil the twin objectives of the stakeholders viz., whether the results of the operations of the business have been satisfactory and what is the financial position of the business. The business prepares its financial statements as answers to these queries. It, therefore, becomes necessary to analyse these statements using comparative tools to assess the operational efficiency and the financial position of the business. Detailed discussions on the analysis of the financial statements find place in the book. A chapter on inflation accounting has also been added to quench the thirst of the stakeholders as to what the real, as opposed the nominal, value of their stake in business operations are.