457 33 powerpoint-slides ch1
TRANSCRIPT
![Page 1: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/1.jpg)
Chapter 1
Basic Understanding
of Accounting
© Oxford University Press – Financial Accounting for Management 2e
![Page 2: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/2.jpg)
Accounting
• Accounting is the language of business.
• Luca Pacioli, a Franciscan monk, is considered
to be the father of the modern system of
© Oxford University Press – Financial Accounting for Management 2e
to be the father of the modern system of
accounting known as the double-entry system
of bookkeeping and accounting.
![Page 3: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/3.jpg)
Accounting
• Accounting is a service-based discipline.
• Accounting is a measurement discipline.
© Oxford University Press – Financial Accounting for Management 2e
• Accounting is the process of preparing and
presenting the accounts.
![Page 4: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/4.jpg)
Definition
• Accounting is ‘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 a financial
© Oxford University Press – Financial Accounting for Management 2e
which are, in part, at least, of a financial
character, and interpreting the results thereof.’
- AICPA
![Page 5: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/5.jpg)
Book-keeping
• Bookkeeping is the record-making phase of
accounting.
• Bookkeeping is the systematic recording of
© Oxford University Press – Financial Accounting for Management 2e
• Bookkeeping is the systematic recording of
financial and economic transactions,
accounting is the analysis and interpretation
of bookkeeping records.
![Page 6: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/6.jpg)
Function of Accounting
• Ascertaining the claims and interest in the said entity;
• measuring the resources and changes in these resources;
assigning the changes to specified period of times
© Oxford University Press – Financial Accounting for Management 2e
• assigning the changes to specified period of times in terms of money;
• communicating information about an entity; and
• fulfilling the statutory requirements, particularly in respect of income tax, sales tax, etc.
![Page 7: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/7.jpg)
Limitations of Accounting
• Financial Nature
• Historical costs
• Measurement unit
• Personal Judgment
© Oxford University Press – Financial Accounting for Management 2e
• Personal Judgment
• Estimates
• Inexact informations
![Page 8: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/8.jpg)
Users of Accounting
• Outside Users
• Inside Users
© Oxford University Press – Financial Accounting for Management 2e
![Page 9: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/9.jpg)
Kind of Accounting Activities
• Financial Accounting
• Cost Accounting
• Taxation Accounting
• Management Accounting
© Oxford University Press – Financial Accounting for Management 2e
• Management Accounting
![Page 10: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/10.jpg)
Basic Terminology
• Capital
• Equity
• Liability
• Drawings
© Oxford University Press – Financial Accounting for Management 2e
• Drawings
• Assets
• Goods or Merchandise
![Page 11: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/11.jpg)
Basic Terminology
• Revenue, Income or Turnover
• Expenses
• Discounts
• Debtors
© Oxford University Press – Financial Accounting for Management 2e
• Debtors
• Creditors
![Page 12: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/12.jpg)
Basic Terminology
• Loss
• Profits
• Cost of Goods Sold
• Expenditures
© Oxford University Press – Financial Accounting for Management 2e
• Expenditures
![Page 13: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/13.jpg)
Cyclical Nature of Business
• receiving assets from owners and creditors;
• purchasing assets (including traded items for
resale) or materials to produce saleable goods
and/or services;
© Oxford University Press – Financial Accounting for Management 2e
and/or services;
• selling goods or services;
• collecting cash or assets equivalent to cash-in-
kind from customers; and
• repaying creditors their dues.
![Page 14: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/14.jpg)
Cyclical Nature of Business
• Financial Cycle
• Operating Cycle
© Oxford University Press – Financial Accounting for Management 2e
![Page 15: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/15.jpg)
Accounting Equation
• Assets = Claims
• Assets = Liabilities + Equity
• Equity = Assets – Liabilities
© Oxford University Press – Financial Accounting for Management 2e
![Page 16: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/16.jpg)
Accounting Equation
• Owners’ Equity = Capital + Retained Earnings
• Retained Earnings = Income − Expenses −
Drawings by Owners
• Owners’ Equity = Capital + (Income − Expenses
© Oxford University Press – Financial Accounting for Management 2e
• Owners’ Equity = Capital + (Income − Expenses
− Drawings)
• Assets = Liabilities + Capital + Retained
Earnings
![Page 17: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/17.jpg)
Accounting Events and Transactions
• A transaction is a particular kind of economic
event that involves the transfer of something
between two enterprises.
• An accounting event is an economic
© Oxford University Press – Financial Accounting for Management 2e
• An accounting event is an economic
transaction that has an impact on the
organization’s assets, liabilities, and/or equity.
The transactions may be internal, or external,
![Page 18: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/18.jpg)
Accounting Basics
• Effects of transactions on Accounting Equation
• Personal Accounts and Impersonal Accounts
• Accounting Methods
– Cash Basis
© Oxford University Press – Financial Accounting for Management 2e
– Cash Basis
– Accrual Basis
![Page 19: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/19.jpg)
Classification of Accounts
• Traditional Approach
– Personal Account
– Impersonal Account
• Real account
© Oxford University Press – Financial Accounting for Management 2e
• Real account
• Nominal account
![Page 20: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/20.jpg)
Classification of Accounts
• Modern Approach
– Assets Account
– Liability Account
– Capital Account
© Oxford University Press – Financial Accounting for Management 2e
– Capital Account
– Revenue Account
– Expense Account
![Page 21: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/21.jpg)
Role And Activities of an Accountant
• Primary Role
• Decision-Maker
• Tax Planner
• External Verifier
© Oxford University Press – Financial Accounting for Management 2e
• External Verifier
• Conscience Keeper
• Manager of Information
![Page 22: 457 33 Powerpoint-slides Ch1](https://reader030.vdocuments.net/reader030/viewer/2022011722/577cca141a28aba711a55080/html5/thumbnails/22.jpg)
Accounting Personnel
• Auditor
• Controller
• Treasurer
• Finance Director
© Oxford University Press – Financial Accounting for Management 2e
• Finance Director