Ac chapter 1

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  • by: SHAHI YAR KHAN
  • Ac chapter 1

    1. 1. Well ComeWell Come ToTo Principles of AccountingPrinciples of Accounting With:With: SHAHI YAR KHANSHAHI YAR KHAN
    2. 2. Basic Accounting Recommended Book Accounting: The basis for business decisions Eleventh Edition By: Meigs William Haka Bettner Focus of Study Chapters to be focused… 1,2,3,4,5
    3. 3. Chapter # 1 Accounting: The Language of Business
    4. 4. Accounting  The Art of  Recording  Classifying  Summarizing and  Communicating the results  Of business transactions
    5. 5. Accounting Accounting is the art of recording, classifying, summarizing and communicating the results of the business transactions. Accounting also called the language of business
    6. 6. Accounting  The Art of  Interpreting the financial activities  Measuring the financial activities  Getting the results from such activities  And communicating these results
    7. 7. Accounting The Art of interpreting, measuring and communicating the results of financial activities.
    8. 8. Accounting  Is a process  That create  Useful  Financial information  For its users (basic purpose of Accounting)
    9. 9. The Purpose of Accounting The basic purpose of Accounting is to provide information to decision makers that is useful in making economic decisions.
    10. 10. Accounting Information needed by:  Management  Investors  Creditors  Government Agencies  Researchers  Labor  Etc Internal External
    11. 11. Types of Accounting  Financial Accounting General Purpose (Profit, loss, assets, obligation etc)  Management Accounting Helps in Planning and Control  Tax Accounting Helps in preparation of Income Tax Return etc
    12. 12. Economic Activities Human Activities Non-Economic Activities Economic Activities Profession Business
    13. 13. Functions of Accounting System  In every Accounting System, the economic activities of the organization are Recoded in the books of accounts.  Next, the recorded data are Classified in the system to accumulate sub-total for various types of economic activities.  Finally, the information is Summarized in Accounting Repots i.e. designed to meet the information needs of the various decision makers.
    14. 14. Business Business is a legal financial activity, for which on specific education is required and in which return is also not definite
    15. 15. Financial Statements A set of Financial Statements consist of four related accounting reports that summarizes the financial resources, obligations, profitability and cash transaction of a business in the few pages 1. Balance Sheet: Financial resources and obligations 2. Income Statement: Profitability of business 3. Statement of Owner’s Equity: Obligation of business to Owner 4. Statement of Cash Flow: Cash Transaction of a Business.
    16. 16. Distinguish b/w Accounting and Book-keeping Book-keeping  It refers to the daily operation of an accounting system i.e. Recording and classifying  It requires little skill of accounting Accounting  It refers to the preparation of Accounting system  Recording and classifying the transactions  Summarize the data  Prepare the Final Reports  It requires Professional Judgment and high skill of accountancy
    17. 17. GAAP: Generally Accepted Accounting Principles GAAP are the “ground rules” for financial reporting. Generally Accepted Accounting Principles provide the general frame work that determines; 1. What information is to be included in the financial statements? & 2. How these information are to be presented ?
    18. 18. Basic Accounting Concepts 1. Cost Principle 2. Objectivity Principle 3. Monetary Principle 4. Business Entity Concept
    19. 19. Accounting Equation Assets = Equities Assets = Owner’s Equity + Liabilities This is the characteristic of the Balance Sheet that Assets always be equal to Liabilities plus Owner’s Equity
    20. 20. Example of Accounting Equation Mr. “A” is started the business by investing $ 100,000… Assets = O/Equity + Liabilities 100,000 = 100,000 + 0
    21. 21. Example of Accounting Equation Further the business borrows a loan from the bank of $ 40,000 Assets = O/Equity + Liabilities 100,000 = 100,000 + 0 40,000 = 0 + 40,000 ---------------------------------------------------- 140,000 = 100,000 + 40,000 ________________________________
    22. 22. Accounting Equation Assets = O/Equity + Liabilities $ 80,000 = $ 60,000 + $ ? 80,000 -60,000 20,000
    23. 23. End of Chapter 1End of Chapter 1 Your views will be highly appreciated
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