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    Introduction To Accounting and Business

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    Hồng Ngọc
    This chapter introduces accounting and business concepts. It describes the nature of businesses and their objectives. Accounting provides financial information to stakeholders like managers, investors and creditors. The accounting profession involves private and public accountants. Accounting standards called GAAP ensure consistent financial reporting. The accounting equation, assets = liabilities + owner's equity, forms the basis for recording business transactions. Financial statements like the balance sheet, income statement, statement of owner's equity and cash flow statement interrelate to provide a comprehensive picture of the business.

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    Introduction To Accounting and Business

    Uploaded by

    Hồng Ngọc
    49 views36 pages
    This chapter introduces accounting and business concepts. It describes the nature of businesses and their objectives. Accounting provides financial information to stakeholders like managers, investors and creditors. The accounting profession involves private and public accountants. Accounting standards called GAAP ensure consistent financial reporting. The accounting equation, assets = liabilities + owner's equity, forms the basis for recording business transactions. Financial statements like the balance sheet, income statement, statement of owner's equity and cash flow statement interrelate to provide a comprehensive picture of the business.

    Original Description:

    Chapter 1: Introduction to Accounting and Business

    Original Title

    Accounting Principle

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    This chapter introduces accounting and business concepts. It describes the nature of businesses and their objectives. Accounting provides financial information to stakeholders like managers, investors and creditors. The accounting profession involves private and public accountants. Accounting standards called GAAP ensure consistent financial reporting. The accounting equation, assets = liabilities + owner's equity, forms the basis for recording business transactions. Financial statements like the balance sheet, income statement, statement of owner's equity and cash flow statement interrelate to provide a comprehensive picture of the business.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    49 views36 pages

    Introduction To Accounting and Business

    Uploaded by

    Hồng Ngọc
    This chapter introduces accounting and business concepts. It describes the nature of businesses and their objectives. Accounting provides financial information to stakeholders like managers, investors and creditors. The accounting profession involves private and public accountants. Accounting standards called GAAP ensure consistent financial reporting. The accounting equation, assets = liabilities + owner's equity, forms the basis for recording business transactions. Financial statements like the balance sheet, income statement, statement of owner's equity and cash flow statement interrelate to provide a comprehensive picture of the business.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 36

    Chapter 1

    Introduction to
    Accounting and
    Business
    Objectives
    • Describe the nature of a business
    • Describe the role of accounting in business
    • Describe the profession of accounting
    • Summarise the development of accounting principles and
    relate them to practice
    • State the accounting equation and define each element of
    the equation.
    • Describe the financial statements of a sole proprietorship
    and explain how they interrelate.
    Content
    • Nature of a business
    • What is accounting?
    • Profession of accounting
    • GAAP
    • Accounting equation
    • Financial statement
    Nature of a business
    • In general, a business is an organisation in
    which basic resources (inputs) are assembled
    and processed to provide goods or services
    (outputs) to customers.

    • Each business has its own objective!!!


    Nature of a business
    • Types of businesses:
    Manufacturing

    Trading

    Service
    Manufacturing
    Trading
    Service
    Types of Business Organisation
    • Sole proprietorship
    • Partnership
    • Company
    What is accounting?
    • Accounting provides information for
    stakeholders.
    • Accounting = Gathering, Processing and
    Communicating
    Providing Information to Stakeholders
    Assess their
    Internal/External information
    Identify
    stakeholders
    1 Stakeholders 2 needs

    Record economic
    4 Accounting 3 Design the AIS
    data about
    business activities Information
    System
    Stakeholder
    • Internal:
    – Manager
    – Employee
    • External:
    – Bank
    – Tax authority
    Stakeholders’ information needs
    • Managers?
    • Investors?
    • Creditors (such as Bank)?
    • Government?
    Profession of accounting
    Accountant

    Private accountant Public accountant

    Accounting Fields

    Financial Accounting Managerial Accounting


    GAAP
    GAAP (Generally Accepted Accounting Principles)
    US GAAP
    UK GAAP
    ...

    * Accountants follow GAAP in preparing reports. By this,


    these reports could be compared from one business to
    another.
    GAAP
    Accounting concepts developed from GAAP.
     Business Entity Concept
     Historical Cost
     Accounting Period
     Going Concern
     Consistency
     ....
    Business entity
    • Means that the owner and the business are
    treated as separate entities. An entity is an
    organisation or a system.
    Historical cost
    • Means that transactions are recorded using
    the cost at the point of transaction. This cost is
    called the historical cost or original cost.
    Accounting Period
    • Means that financial statements of the
    business are prepared for a period of time,
    either a month or a year.
    Going concern
    • Means when we record the transactions of a
    business, we assume that the business will
    continue to operate for the foreseeable
    future.
    Consistency
    • Means that accountant tries to prepare the
    financial statement of the business on the
    same basis every year.
    Accounting equation

    Assets = Liabilities + Owner’s Equity

    * All business transactions can be stated in terms of changes in the elements of


    the accounting equation
    Assets
    • Resources controlled by the business
    Assets
    • Cash
    • Property, Plant and Equipment
    • Stock (Inventory)
    • Patent right
    • Land usage right
    • Money in bank account
    Liabilities
    • Debts owed to outsiders (creditors)
    • Loans
    • Advance payment from customer
    • Bank overdraft
    • Payable to supplier
    • Tax payable
    Owner’s Equity
    • Owner’s right to the asset of the business
    • Contributed capital investment
    • Reserves
    • Retained earnings
    Business Transactions and the Accounting
    Equation
    • Deposit in bank account for initial capital
    investment
    • Purchase a machine by cash
    • Borrow money from your family
    • Sell goods to customer and receive cash
    Financial statement
    • Profit and loss statement
    • Statement of owner’s equity
    • Balance sheet
    • Statement of cash flows
    • Notes of FS
    Profit and loss statement
    Revenues

    Expenses
    Statement of owner’s equity

    Summary
    of the
    changes in
    the
    owner’s
    equity
    Balance sheet

    A list of
    assets,
    liabilities
    and
    owner’s
    equity
    Statement of cash flows

    A summary
    of the cash
    receipts and
    cash
    payment
    Notes of FS
    • List of note to accommodate user of FS with
    additional information.
     Accounting policies
     Detailed information
     Contingency liabilities
     Events after reporting date
     Transactions with related parties
    How they linked together?
    Profit and loss Statement of
    Balance sheet
    statement owner’s equity

    Notes of FS Statement of cash


    flows

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