what is accounting i
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Introduction To
Accounting
Introduction To
Accounting
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OutlineOutline
The nature of firm;The nature of firm;
The value of accounting;The value of accounting;
The Evolution of The Evolution of accounting;accounting;
Accounting: A bird viewAccounting: A bird view
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Opening StoryOpening Story
Everyone here is supposedEveryone here is supposedto know the Outlaws of theto know the Outlaws of theMarsh;Marsh;
Question I:Question I:Who plays the role of ³CFO´Who plays the role of ³CFO´
of the Marsh Mountain Liang?of the Marsh Mountain Liang?
There are two;There are two;
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Opening StoryOpening Story
Some otherSome other
positions relatedpositions related
to accounting;to accounting;
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Opening StoryOpening Story
Question II:Question II:
Why does the MarshWhy does the Marsh
Mountaion Liang needMountaion Liang need
such positions as CFO andsuch positions as CFO andChief Controller?Chief Controller?
We must know that theWe must know that the
title of SHUIHUZHUAN istitle of SHUIHUZHUAN is
also translated asalso translated as All Men All Men
are Brothers.are Brothers.
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The Value of AccountingThe Value of Accounting
Why does accounting exist in everyWhy does accounting exist in every
organization?organization?
I explain this question in another way:I explain this question in another way:
what kind of unique value doeswhat kind of unique value doesaccounting possess?accounting possess?
The value must be fundamental and theThe value must be fundamental and the
society could not go without;society could not go without;
Another way to explain: Darwinism;Another way to explain: Darwinism;
Natural selection and the fittest survive;Natural selection and the fittest survive;
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The Nature of FirmThe Nature of Firm
Although every organizationAlthough every organization
needs accounting, we just talk needs accounting, we just talk
about enterprise accounting forabout enterprise accounting for
simplicity;simplicity;
What is the nature of firm?What is the nature of firm?
We discuss about human natureWe discuss about human nature
first;first;
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The Nature of ManThe Nature of Man
Ethic Man;Ethic Man;
Human Nature: Virtue vs. Evil;Human Nature: Virtue vs. Evil;
Confucis vs.Confucis vs.
Hsun Tzu
Hsun Tzu
Economic Man;Economic Man;
There is no ethics concept inThere is no ethics concept in
Economists¶ dictionary;Economists¶ dictionary;It is not from the benevolence of the butcher,It is not from the benevolence of the butcher,
the brewer, or the baker that expect ourthe brewer, or the baker that expect our
dinner, but from their regards their owndinner, but from their regards their own
interest. (Adam Smith);interest. (Adam Smith);
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The Nature of ManThe Nature of Man
We need a compound analytical tool;We need a compound analytical tool;
Maslow and the Hierarchy of Needs: the mostMaslow and the Hierarchy of Needs: the most
common tool;common tool;
Michael Jensen andWilliam MecklingMichael Jensen andWilliam Meckling
R EMMR EMM
R esourceful,R esourceful,
Evaluator,Evaluator,
Maximizer,Maximizer,
Model.Model.
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The Nature of FirmThe Nature of Firm
Classical theories;Classical theories;
A device to capture transaction costs;A device to capture transaction costs;
A nexus of contracts;A nexus of contracts;
Agency theory;Agency theory;
Economic Darwinism;Economic Darwinism;
,,,,,,,,
R EMM perspective:R EMM perspective:
A coalition of economic men;A coalition of economic men;
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The Nature of FirmThe Nature of Firm
On the coalition of economic men:On the coalition of economic men:
Why does R EMM join a firm?Why does R EMM join a firm?
Maximization of his own interests;Maximization of his own interests;
When does R EMM quit from a firm?When does R EMM quit from a firm?
Seek different chance to maximize his ownSeek different chance to maximize his own
interests;interests;
When we define human being as R EMM, weWhen we define human being as R EMM, we
have to solve the fundamental issue:have to solve the fundamental issue:
How does R EMM trust each other?How does R EMM trust each other?
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The Value of AccountingThe Value of Accounting
Without trust, we could not have even aWithout trust, we could not have even a
family, let alone a firm;family, let alone a firm;
R EMMs have to find efficient ways toR EMMs have to find efficient ways to
develop and maintain trust;develop and maintain trust;
They know that they have to;They know that they have to;
The problem is how;The problem is how;
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The Value of AccountingThe Value of Accounting
Historically, R EMMs have created andHistorically, R EMMs have created and
experimented numerous ways;experimented numerous ways;
Accounting is proven to be costAccounting is proven to be cost--effective;effective;
It is suitable to all kinds of firms,It is suitable to all kinds of firms,
No matter of their size,No matter of their size,
No matter of the geographic locations;No matter of the geographic locations;
No matter of ownership;No matter of ownership;
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The Evolution of AccountingThe Evolution of Accounting
Now that accounting is connected withNow that accounting is connected with
human nature and trusting issue, wehuman nature and trusting issue, we
may trace the history of accounting tomay trace the history of accounting to
the early days of human beings, orthe early days of human beings, or P rimitive Society P rimitive Society;;
the Incas and Quipu;the Incas and Quipu;
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Sumer andSumer and CUNEIFOR M CUNEIFOR M
Phoenician andPhoenician and AL PH AB ET AL PH AB ET
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The Evolution of AccountingThe Evolution of Accounting
Why do our ancestors invent Alphabet?Why do our ancestors invent Alphabet?
To build trusting via enhanced memory;To build trusting via enhanced memory;
This is the right value of Accounting.This is the right value of Accounting.
Chronology of spelling byChronology of spelling by Steve BettSteve Bett;; 3200 BC Writing developed as an extension of the3200 BC Writing developed as an extension of the
accounting system in Babylon;accounting system in Babylon;
A British accounting scholar claimed:A British accounting scholar claimed:
Phoenician inventedPhoenician invented AL PH AB ET AL PH AB ET
for the sake of accounting.for the sake of accounting.
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The Evolution of AccountingThe Evolution of Accounting
The primitive stage of accounting;The primitive stage of accounting;
A tool to help to maintain the trusts;A tool to help to maintain the trusts;
Alphabet, numeric and organizational control;Alphabet, numeric and organizational control;
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The Evolution of AccountingThe Evolution of Accounting
The birth of doubleThe birth of double--entry bookkeeping;entry bookkeeping;
A. C. Littleton on the birth of DEB;A. C. Littleton on the birth of DEB;
Another storyAnother story
The Crusaders (1095The Crusaders (1095--1270);1270);
Italian commodity economy, developed bank Italian commodity economy, developed bank
business;business;
DEB: the symbol of accounting science;DEB: the symbol of accounting science;
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The Evolution of AccountingThe Evolution of Accounting
From Bookkeeping to Financial AccountingFrom Bookkeeping to Financial Accounting
Capital market: accounting information isCapital market: accounting information iswidely circulated;widely circulated;
The most common users: outside of theThe most common users: outside of thereporting entity;reporting entity;
GAAP: the symbol of the conversion;GAAP: the symbol of the conversion;
F inancial Accounting F inancial Accounting is also called Externalis also called External
Accounting;Accounting;
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The Evolution of AccountingThe Evolution of Accounting
Industrial revolution and modern massIndustrial revolution and modern mass
manufacturing process;manufacturing process;
Business profiting model is changed;Business profiting model is changed;
Originally, buy low, sell high;Originally, buy low, sell high;
Now, buy raw materials, manufacture into productsNow, buy raw materials, manufacture into products
and sell out;and sell out;
The determination of the cost of manufacturedThe determination of the cost of manufactured
products is essential in profit determination;products is essential in profit determination;
C ost Accounting C ost Accounting is ³invented´;is ³invented´;
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The Evolution of AccountingThe Evolution of Accounting
From cost accounting to managementFrom cost accounting to managementaccounting;accounting;
More complicated business activities;More complicated business activities;
Dynamic and keepDynamic and keep--changing environment;changing environment; Much larger business scale;Much larger business scale;
Decision making:Decision making:much more complicated;much more complicated;
Management Accounting Management Accounting isis³³inventedinvented´;´;
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The Evolution of AccountingThe Evolution of Accounting
From commodity market to capital market;From commodity market to capital market;
The developing of capital market raises twoThe developing of capital market raises two
issues:issues:
Effective ways to raise and allocate capital;Effective ways to raise and allocate capital;
Trust crisis;Trust crisis;
We haveWe have C orporate F inanceC orporate F inance andand Auditing Auditing
subjects respectively.subjects respectively.
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AccountingAccounting
FirmsFirms
FirmFirmFirmFirm
Financial statementsFinancial statements investorsinvestorsFinancial
Accounting
Financial
Accounting
AuditingAuditing
FinanceFinanceManagement
Accounting
Management
Accounting
Cor porate Finance and AuditingCor porate Finance and Auditing
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The Evolution of AccountingThe Evolution of Accounting
Accounting will evolve with theAccounting will evolve with the
development of economy anddevelopment of economy and
technology;technology;
The invention of computer and its adoptionThe invention of computer and its adoption
into accounting practice;into accounting practice;
R educes time, effort and cost of R educes time, effort and cost of
recordrecord--keeping;keeping;Improves clerical accuracy;Improves clerical accuracy;
Changes the way we store, process andChanges the way we store, process and
summarize large masses of data;summarize large masses of data;
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The Evolution of AccountingThe Evolution of Accounting
Website and Internet;Website and Internet;
dissemination of accounting information:dissemination of accounting information:easy and no increment cost;easy and no increment cost;
Internet based financial reporting system;Internet based financial reporting system;
Extensible Business R eporting Language (XBR L) wasExtensible Business R eporting Language (XBR L) wasdeveloped to provide users with an efficient and effectivedeveloped to provide users with an efficient and effectivemeans of preparing and exchanging financial informationmeans of preparing and exchanging financial informationover the Internet.over the Internet.
Extensible Assurance R eporting Language (XAR L) wasExtensible Assurance R eporting Language (XAR L) wasdesigned to enable assurance providers to report on thedesigned to enable assurance providers to report on the
integrity of information distributed over the Internet andintegrity of information distributed over the Internet andhelp users and companies place warranted reliance on suchhelp users and companies place warranted reliance on suchinformationinformation
Events accounting: may be reEvents accounting: may be re--introduced underintroduced underinternet environment;internet environment;
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The Evolution of AccountingThe Evolution of Accounting
SOX and its impact on accounting;SOX and its impact on accounting;
Enron filed for bankruptcy protect inEnron filed for bankruptcy protect in
December 3, 2001;December 3, 2001;
WorldCom reported billions of false profit inWorldCom reported billions of false profit in
June, 2002;June, 2002;
SarbanesSarbanes--Oxley Act of 2002 was signed byOxley Act of 2002 was signed by
P
resident Bush and becameP
resident Bush and becamea law in June 30, 2002;a law in June 30, 2002;
It mainly focuses on accounting;It mainly focuses on accounting;
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The Boundary of AccountingThe Boundary of Accounting
Accounting: a boundless discipline;Accounting: a boundless discipline;
What should accountants supposed to do?What should accountants supposed to do?
For instance, the job description of CFO;For instance, the job description of CFO; The job description of chief controller;The job description of chief controller;
No definite definition;No definite definition;
No generally accepted principles;No generally accepted principles;
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You may useYou may use
knowledge freely asknowledge freely as
soon as you find thesoon as you find the
underlying regularity;underlying regularity;
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SummarySummary
The nature of firm: contemporary interestThe nature of firm: contemporary interestcoalition of R EMM;coalition of R EMM;
R EMMs have to find costR EMMs have to find cost--effective ways to buildeffective ways to buildtrust;trust;
Accounting is proven cheap and reliable;Accounting is proven cheap and reliable;Accounting is evolving with economy andAccounting is evolving with economy and
technology, etc;technology, etc; Four main branches: Financial accounting,Four main branches: Financial accounting,
management accounting, corporate financemanagement accounting, corporate financeand auditing;and auditing;
Computer and internet: already changedComputer and internet: already changedaccounting significantly;accounting significantly;
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ATTENTION COMMERCE
STUDENTS
ATTENTION COMMERCE
STUDENTS ± ± ACCOUNTING(FINANCIAL & COST) OFACCOUNTING(FINANCIAL & COST) OF
± ± ICMAP STAGE 1,2,3,4 (NEW CLASSES)ICMAP STAGE 1,2,3,4 (NEW CLASSES)
± ±CA..MODULE B,C,DCA..MODULE B,C,D
± ± PIPFA (FOUNDATION,INTERMEDIATE,FINAL)PIPFA (FOUNDATION,INTERMEDIATE,FINAL)
± ± ACCAACCA--F1,F2,F3F1,F2,F3
± ± BBA,MBABBA,MBA
± ±B.COM(FRESH),M.COMB.COM(FRESH),M.COM
± ± MAMA--ECONOMICS..O/A LEVELSECONOMICS..O/A LEVELS
± ± KHALID AZIZ«..0322KHALID AZIZ«..0322--33857523385752
± ± http://finance.groups.yahoo.com/group/costhttp://finance.groups.yahoo.com/group/cost--
accountants/accountants/
± ± ACCOUNTING(FINANCIAL & COST) OFACCOUNTING(FINANCIAL & COST) OF
± ± ICMAP STAGE 1,2,3,4 (NEW CLASSES)ICMAP STAGE 1,2,3,4 (NEW CLASSES)
± ±CA..MODULE B,C,DCA..MODULE B,C,D
± ± PIPFA (FOUNDATION,INTERMEDIATE,FINAL)PIPFA (FOUNDATION,INTERMEDIATE,FINAL)
± ± ACCAACCA--F1,F2,F3F1,F2,F3
± ± BBA,MBABBA,MBA
± ±B.COM(FRESH),M.COMB.COM(FRESH),M.COM
± ± MAMA--ECONOMICS..O/A LEVELSECONOMICS..O/A LEVELS
± ± KHALID AZIZ«..0322KHALID AZIZ«..0322--33857523385752
± ± http://finance.groups.yahoo.com/group/costhttp://finance.groups.yahoo.com/group/cost--
accountants/accountants/