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CHAPTER 1 (Financial Accounting and Reporting)

Accounting involves identifying, recording, and communicating economic information to help make decisions. It is the language of business and provides both quantitative and qualitative financial information to internal and external users. Accounting has evolved from a simple recording system to an information system that supports various functions in business and meets the needs of different user groups through general and special purpose accounting. The major branches of accounting include financial, management, government, auditing, tax, and cost accounting.

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4K views

CHAPTER 1 (Financial Accounting and Reporting)

Accounting involves identifying, recording, and communicating economic information to help make decisions. It is the language of business and provides both quantitative and qualitative financial information to internal and external users. Accounting has evolved from a simple recording system to an information system that supports various functions in business and meets the needs of different user groups through general and special purpose accounting. The major branches of accounting include financial, management, government, auditing, tax, and cost accounting.

Uploaded by

Wawex Davis
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CHAPTER 1

(Introduction to Accounting)

ACCOUNTING
mnemonics (IRC)

--process of Identifying, Recording and Communicating economic information that is useful in making
economic decisions.

Journalizing
--recognizes/records the accountable events identified.

Posting
--classifies the effects of the event on the “accounts”

Account
--basic storage of information in accounting

Financial Statements
--most common form of accounting report

TYPES of INFO. provided by Accounting


1. Quantitative Information
2. Qualitative Information
3. Financial Information

Accounting as Social Science


--body of knowledge

Accounting as Practical Art


--creative skills and judgment

Accounting as an Information System


--input, process, output

BOOKKEEPING vs. ACCOUNTING


Bookkeeping
--recording the accounts/transactions of and entity.
--ends with preparation of trial balance
--does not require interpretation

Accounting
--covers whole process of IRC to interested users.

FUNCTIONS OF ACCOUNTING IN BUSINESS


--language of business

1. External Users—investment and credit decisions


2. Internal Users—managing the business

USERS of ACCOUNTING INFORMATION


1. Internal Users—directly involves in managing
Ex: Business Owners directly involved
Board of Directors
Managerial Personnel
2. External Users—not directly involved
Ex: Existing and Potential Investors
Lenders and Creditors
Government Agencies
Non-managerial Employees
Customers
Public

TYPES of Accounting Information classified to USERS’ NEEDS

1. General Purpose Accounting Information


--common needs/financial accounting/external users
2. Special Purpose Accounting Information
--specific needs/management accounting/internal users

HISTORY
 Double Entry Recording System
 Summa di Arithmetica Geometria Proportioni and Proportionista
 Fra Luca Pacioli

COMMON BRANCHES OF ACCOUNTING


1. Financial Accounting
2. Management Accounting
3. Government Accounting
4. Auditing
5. Tax Accounting
6. Cost Accounting
7. Accounting Education
8. Accounting Research

FORMS OF BUSINESS ORGANIZATIONS


1. Sole or Single Proprietorship (DTI)
2. Partnership (SEC)
3. Corporation (SEC)
4. Cooperative (CDA)

TYPES OF BUSINESS ACCORDING TO ACTIVITIES


1. Service Business
2. Merchandising (Trading)
3. Manufacturing
4. Hybrid Businesses

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