Financial Accounting
1
ACCOUNTING 1
(ACN101- M)
STUDY UNIT 1: THE NATURE AND FUNCTION OF ACCOUNTING
DEFINITION: • • • Accounting can be defined as the orderly & systematic recording of the monetary values of financial transactions of a business The reporting of results Providing financial information as a basis for decision making
3 main processes define the accounting process: 1. IDENTIFYING: Selecting evidence of economic / financial activity (transactions)
2. RECORDING transactions to provide a permanent history of the businesses financial activities 3. COMMUNICATING the recorded information to interested users by use of accounting reports IE Financial Statements
The Nature Of Accounting: Accounting is used to convey the financial situation of an enterprise. It is therefore essential that the recipient of such information is able to understand it. Both words and figures are used to convey this information. “Accounting is a language which is used to convey financial information to users”
Forms Of Ownership: 1. 2. 3. 4. 5. Sole Trader / Proprietor Close Corporation Company Partnership Non – profit Organizations
2
Users of Financial Information: Financial information is required / used for analysis by: 1. INVESTORS: The Shareholders with a Financial Interest in the business 2. CREDITORS: The lenders of money, merchandise and services also have a Financial Interest in the business 3. EMPLOYEES: Regarding job security and wage negotiations and predictions for future employment 4. GOVERNMENT: Regarding taxes, and also for statistical purposes. Also used as an indication for MacroEconomic planning 5. MANAGEMENT: In order to plan and set new goals for future economic growth
FIELDS OF ACCOUNTING: Financial Accounting VS Management Accounting • Provides financial information for specific purposes • Used by management for decision making • Used to assist management reach financial goals
• Recording transactions and preparing financial statements regarding the
ACCOUNTING 1
(ACN101- M)
STUDY UNIT 1: THE NATURE AND FUNCTION OF ACCOUNTING
DEFINITION: • • • Accounting can be defined as the orderly & systematic recording of the monetary values of financial transactions of a business The reporting of results Providing financial information as a basis for decision making
3 main processes define the accounting process: 1. IDENTIFYING: Selecting evidence of economic / financial activity (transactions)
2. RECORDING transactions to provide a permanent history of the businesses financial activities 3. COMMUNICATING the recorded information to interested users by use of accounting reports IE Financial Statements
The Nature Of Accounting: Accounting is used to convey the financial situation of an enterprise. It is therefore essential that the recipient of such information is able to understand it. Both words and figures are used to convey this information. “Accounting is a language which is used to convey financial information to users”
Forms Of Ownership: 1. 2. 3. 4. 5. Sole Trader / Proprietor Close Corporation Company Partnership Non – profit Organizations
2
Users of Financial Information: Financial information is required / used for analysis by: 1. INVESTORS: The Shareholders with a Financial Interest in the business 2. CREDITORS: The lenders of money, merchandise and services also have a Financial Interest in the business 3. EMPLOYEES: Regarding job security and wage negotiations and predictions for future employment 4. GOVERNMENT: Regarding taxes, and also for statistical purposes. Also used as an indication for MacroEconomic planning 5. MANAGEMENT: In order to plan and set new goals for future economic growth
FIELDS OF ACCOUNTING: Financial Accounting VS Management Accounting • Provides financial information for specific purposes • Used by management for decision making • Used to assist management reach financial goals
• Recording transactions and preparing financial statements regarding the