This chapter introduces you to the a variety of financial accounting topics. You will learn about the primary forms of business organization and the three principal types of business activity. You will also learn about users of accounting information and how information is delivered. Further this chapter covers the topics such as different types of accounting, contribution of an accounting system, Auditing and Accounting principles.
When you finished studying this chapter, you should be able to:
- Describe what a business does and various ways a business can be organized.
- Classify business transactions as operating, investing or financing activities.
- Describe who uses accounting information and why accounting information is important to them
Definition of Accounting
Accounting consists of two elements, first recording transactions must be recorded as they occur in order to provide up to date information for management. Second is Summerising the transactions for a period are summerised in order to provide information about the company to interested parties. Important stage in summerising is preparing financial statements, include incomestatement reflect the performance of a business over a period of time. Balance sheet reflects the position of a business at a point in time.
The History of Accounting
No one really knows that who invented accounting, references in the bible and the quran indicate that some from of accounting has existed for centuries.Accounting records were used by ancient traders, farmers , etc.. to control their assets, monitor their costs, collect payments , and calculation In 1494 Luca pacioli an italian monk , codified existing bookkeping practice , the double-entry bookkeping system that we know today. accounting continued to develop, but increased in important with the rise in popularity of companies as the predominant form of business entity. Due to the separation of the ownership and the management , shareholders were required to produce and interpret financial to enable shareholders to make decisions.accounting standards were later developed to make it easier to compare different companies , and the accounting profession grew in order to assists in the application of these something complex accounting standards.
The growth in computerisation saw a reduction in traditional bookkeeping work , and globalisation meant that many clients were large multinational companies requiring advice on many areas in additional to accounting. Today the accounting profession is multimillion doller industry , and gives client advice on wide range of business issues. Many accountants also employed directly by companies , to produce information that is used making decisions. accounting nowadays could be public accountants work for an accountant firm and serve a variety of clients , or could work in industry be employed directly by a company or organisation. Public accountants perform accounting and audit work , but they also provide a variety of other services , include tax , insolvency , assurance , business advisory and corporate fianace.
- Types Of Business Entity
- Users Of The Financial Statements
- Types Of Accounting
- Past Transactions and Other Economic Events in Financial Accounting
- The Financial Accounting Process
- Financial Statements
- Decision Makers
- Generally Accepted Accounting Principles (GAAP)
- The Role of Auditing
- Economic Consequences and Managerial Preferences for Accounting Principles
- The Two Roles of Financial Accounting
- The Political Nature of Accounting Standard Setting
- Ethics and Accounting