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AN INTRODUCTION TO

ACCOUNTING
OUTLINE

Introduction
Objectives of Accounting
Importance of Accounting
Functions of Accounting
Advantages of Accounting
Limitations of Accounting
Concepts and Principles of Accounting
Difference between Financial Accounting
and Management Accounting
Role of Accounting
Conclusion

Some Definitions of Accounting
Accountancy is the process of communicating
financial information about a business entity to
users such as shareholders and managers.
The communication is generally in the form
of financial statements that show in money terms
the economic resources under the control of
management; the art lies in selecting the
information that is relevant to the user and is
reliable. The principles of accountancy are applied
to business entities in three divisions of practical
art, named accounting,bookkeeping, and auditing
OBJECTIVES OF ACCOUNTING
To keep systematic record
To ascertain the results of the operations
To ascertain the finencial position of the
business(assets, liabilities and profitability)
To protect business properties( fixed assets
and how money is invetsted)
To ficilitate rational decision-making
To satisfy the requirement of law
Accountancy is defined by the Oxford
English Dictionary (OED) as "the profession
or duties of an accountant".
Accounting is defined by the American
Institute of Certified Public
Accountants (AICPA) as "the art of
recording, classifying, and summarizing in a
significant manner and in terms of money,
transactions and events which are, in part
at least, of financial character, and
interpreting the results thereof."
Accounting is the language of business
Its a standard set of rules for measuring a
firms financial performance
Acounting is required in almost all activities
and all organisations which require money
Assessing a companys financial
performance is important for many groups
including:
> the firms officers( managers and
employees)
> investors( current and potential
shareholders)
>lendrs (bancs) AND the general public
FUNCTIONS OF ACCOUNTING
Record keeping function
Managerial function
Legal requirement function
Langauge of business( it translates all
these financial transactions into a language you
can understand)

ADVANTAGES OF ACCOUNTING
Accounting helps in having complete record of
business transactions
It provides useful information for making
economic decisions
It facilitates comparative study of current years
profit, sales, expenses, etc.(so as to conclude
what could be the business efficiency)
It provides users with factual and interpretive
information about transactions
It helps in complying with certain legal
formalities


LIMITATIONS OF Accounting
Accounting is historical in nature
Its limited to monetary transactions
Money value is bound to change often from
time to time ( which accounting doesnt
consider)
The accounting statements do not show the
impact of inflation
CONCEPTS AND PRINCIPLES OF
ACCOUNTING
When writing accounts and financial
statements, accountants have to follow a
number of concepts (or assumption) and
principles. A concept is generally something
that is accepted as being true. Here are some
of the most important concepts:
1. the seperate entity concept ( a business is an
accounting unit seperate from its owners,
creditors and managers)

2. The time period concept: the economic life
of a business can be devided into (artificial)
time periods
3. The continuity(going concern) concept:
business will continue into the future.
4.The unit-of measure concept: all financial
transactions are in a single monetary unit or
currency
PRINCIPLES

Some of the principles in accounting are
1. The full disclosure principle
2. The objectivity principle: accounts should
include facts, not opinions or feelings
3. The revenue recognition principle:
revenue is recognized in the accounting
period in which it is earned
4. The matching principles: each cost or
expense related to revenue must be
recorded in the same accounting period
as the revenue it helped to earn.
DIFFERENCE BETWEEN FINANCIAL
ACCOUNTING AND MANAGEMENT
ACCOUNTING
Financial accounting is useful for
shareholders and creditors
Mgt accounting is useful for managers in
future decision making.

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