Introduction to Accounting

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Introduction to Accounting

• Accounting 11
• Ms. Stewart

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What is Accounting?

• Accounting can be defined simply as the
  recording, summarising and interpretation of
  financial information.
• The origins of accounting can be traced back to
  ancient times, with the need for accurate records
  of trading transactions. A logical system of
  recording financial information, known as
  double-entry bookkeeping, was in use in medieval
  Italy, and the first published accounting work
  was written in 1494
• by a Venetian monk, Luca Pacioli.

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Key Aspects of Accounting

• The key aspects of accounting are identifying,
  recording and communicating
• 1) First, economic events are identified. A sale
  at a clothing store, payment of employee benefits
  by a business, or purchase of equipment are all
  examples of economic events.
• 2) All economic events are recorded. Recording
  provides a history of a company's financial
  activities. In this step, economic events are
  also classified and summarized.
• 3) Finally, information about classified and
  summarized economic events is communicated to
  interested parties. Such communication may take
  several forms, one such form is a financial
  statement which you will learn about later in
  this course.

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Types of Accounting

• Financial Accounting provides information to
  satisfy the needs of external users.
• Managerial Accounting provides information that
  is useful in running a company by internal users.

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Who uses Accounting Information?

• External users are parties outside the reporting
  entity or company who are interested in the
  accounting information.
• Examples?
• Investors, lenders/suppliers, government,
  public/customers

• Internal users are parties inside the reporting
  entity or company who are interested in
  accounting information.
• Examples?
• Management, employees

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Why do businesses need to do accounting?

• Businesses must establish accounting systems in
  order to keep accurate records of their financial
  standing and to monitor profits and losses.
• Both businesses organized for profit and
  non-profit organizations must keep accounting
  records.

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How do we keep accounting consistent?

• People and organizations make decisions based on
  financial information prepared by accountants.
  That is why it is important for people and
  organizations to understand the ways in which
  accounting information is measured.
• To ensure consistency, rules are established that
  business people can use to make sure they are
  comparing oranges to oranges.

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Generally Accepted Accounting Principles (GAAPS)

• Generally Accepted Accounting Principles (GAAP)
  are common standards that guide accountants in
  reporting economic events.
• GAAP places all companies on a level playing
  field by ensuring that any financial information
  presented is uniformly consistent, relevant,
  feasible and objective.