8/17/2019 Acctg Session
1/12
Overview of Hedge Funds
Mar-2010
C O N F I D E N T IA L
Basics of Accounting
August 2010
8/17/2019 Acctg Session
2/12
Basics of Accounting Page 2
C O N F I D E N T IA L
Denition of Accounting
Accounting has been dened b the A!erican "nstitute of #ertiedPub$ic Accountants% as &'he art of recording% c$assifing andsu!!ari(ing in a signicant !anner and in ter!s of !one%transactions and events which are% in )art at $east% of a nancia$character% and inter)reting the resu$ts thereof*
8/17/2019 Acctg Session
3/12
Basics of Accounting Page +
C O N F I D E N T IA L
Groups of Accounts
Liabilities
Assets
Income
Expenditure
Owner’s Capital
,ach of the grou)s has severa$ sub-grou)s and ever such sub-grou)either has accounts or sub-grou)s as its sub-units% for!ing a treestructure
8/17/2019 Acctg Session
4/12
Basics of Accounting Page .
C O N F I D E N T IA L
Debits and #redits
A$$ a!ounts recorded in the boo/s of account are )$aced either to thedebit or credit of an account For an transaction% which accountsshou$d be debited and which shou$d be credited is deter!ined b thefo$$owing o$den ru$es3
D,B"' what co!es in% #4,D"' what goes out
D,B"' the receiver of benet% #4,D"' the giver of benet
D,B"' a$$ e5)enses and $osses% #4,D"' a$$ inco!es and gains
8/17/2019 Acctg Session
5/12
Basics of Accounting Page 6
C O N F I D E N T IA L
Other 'o)ics
Capital and e!enue Expenditure " #a)ita$ ,5)enditure is that e5)enditurewhich resu$ts in the ac7uisition of an asset "te!s of e5)enditure whose benete5)ires within the ear or e5)enditure incurred for !aintaining the business or/ee)ing the assets in good wor/ing condition are referred to as 4evenue,5)enditure
Financial #tatements " At the end of the re)orting )eriod 8 which is genera$$one ear 8 the accounting transactions for the entire )eriod are su!!arised
into a few state!ents 'he !a9or Financia$ :tate!ents are3
1 Ba$ance :heet3 :tate!ent of Assets and ;iabi$ities as on a )articu$ar date%indicating the nancia$ )osition of an entit at a given )oint of ti!e
2 Prot and ;oss Account3 :tate!ent of "nco!e and ,5)enditure for there)orting )eriod% indicating the nancia$ )erfor!ance of the entit duringthe re)orting )eriod
$sers of Financial #tatements% Manage!ent% :hareho$ders% "nvestors%;enders% overn!ent
8/17/2019 Acctg Session
6/12
Basics of Accounting Page <
C O N F I D E N T IA L
#once)ts of Accounting
'o ensure unifor!it in )re)aration of accounts across entities% the fo$$owing
conce)ts are a))$ied when recording accounting transactions3
1&usiness Entit' Concept% 'he business for which accounts are!aintained is treated as an entit distinct fro! its owners and !anagers
2(one' (easurement Concept% A$$ transactions a=ecting the businessare stated in !one ter!s and recorded in the Boo/s of Account
+Dual Aspect Concept% ,ver transaction has two as)ects 8 a >debit? anda >credit? 8 and the su! of a$$ debits wi$$ e7ua$ the su! of a$$ credits
.Cost Concept% 'ransactions are recorded at the actua$ cost
6Goin) Concern Concept% At the ti!e of recording the transactions% it isassu!ed that the entit wi$$ continue to re!ain in business for as $ong as
can be foreseen
8/17/2019 Acctg Session
7/12
Basics of Accounting Page @
C O N F I D E N T IA L
#once)ts of Accounting contd
8/17/2019 Acctg Session
8/12
Basics of Accounting Page
C O N F I D E N T IA L
#onventions of Accounting
'o !a/e the infor!ation contained in nancia$ state!ents c$ear and!eaningfu$% the are drawn u) according to the fo$$owingconventions3
1Consistenc'% Accounting )ractices shou$d re!ain the sa!e fro!ear to ear
2Disclosure% A$$ infor!ation which is essentia$ for fu$$understanding the nancia$ state!ents shou$d be disc$osed inaddition to the infor!ation re7uired to be disc$osed b $aw
+Conser!atism% Financia$ state!ents shou$d be drawn u) on aconservative basis 8 ie antici)ated inco!e shou$d not be recordedwhereas $i/e$ $osses shou$d be )rovided for
8/17/2019 Acctg Session
9/12
Basics of Accounting Page C
C O N F I D E N T IA L
Process of Accounting
After each transaction is done% the )rocess to account for thistransaction can be de)icted with the he$) of the be$ow ste)s3
1Post the transaction in the $edger 'he ourna$ ,ntr
2enerate the 'ria$ Ba$ance ;ist of ba$ances in a$$ the accounts as ofthe end of the s)ecied )eriod
+#o!)i$ation of Prot E ;oss Account.Pre)aration of Ba$ance :heet
8/17/2019 Acctg Session
10/12
Basics of Accounting Page 10
C O N F I D E N T IA L
:creenshots 8 "nco!e :tate!ent
8/17/2019 Acctg Session
11/12
Basics of Accounting Page 11
C O N F I D E N T IA L
:creenshots 8 Ba$ance :heet
8/17/2019 Acctg Session
12/12
Basics of Accounting Page 12
C O N F I D E N T IA L
T*an+s,