Introduction to Financial Accounting                       Topic 1: Introduction                       Learning Objectives...
What is accounting?           An information system that           provides reports to stakeholders           (users or in...
Accounting — An Information System                      Identification                        of UsersApr 2011            ...
Accounting — An Information System                      Identification                        of Users                    ...
Accounting — An Information System                      Identification                        of Users                    ...
Accounting — An Information System                             Identification                               of Users      ...
Accounting — An Information System                             Identification                               of Users      ...
Accounting — An Information System                             Identification                               of Users      ...
Why do we study accounting?      • Accounting is the language of business.      • Accounting provides information.      • ...
How to Study Accounting in                      NP?      • Introduction to Financial Accounting        (INFA) 1st semester...
Users of Accounting Information                                     • investors                                     • Bank...
The Accounting Profession               Public                     Private             accounting                 accounti...
What is a business?      • A business is an organisation in which basic        resources (inputs) are assembled and proces...
Types of business organisations      • Sole proprietorship      • Partnership      • CompanyApr 2011                      ...
Types of businesses      • Manufacturing business      • Trading business      • Service businessApr 2011                 ...
Assets      • What are your assets?Apr 2011                         C1 - 16
Asset                        Assets      • Resources owned by the business      • Items of value owned by the business    ...
Liability                         Liabilities       • Amounts owed by a business         to external parties.       • Exam...
Liability                            Liabilities      • Say you borrowed $5        from your friend for                You...
Owner’s equity                  Owner’s Equity/Capital      • Amount of owner’s interest/investment in        the business...
The Accounting Equation             Relationship between the total assets, total           liabilities and total owner’s e...
The Accounting Equation                   Resources           What are an organization’s resources called?Apr 2011        ...
The Accounting Equation              Resources      =    Sources               Assets                                 What...
The Accounting Equation              Resources      =    Sources                                   Liabilities            ...
The Accounting Equation                    Assets = Equities           Assets = Liabilities + Owner’s Equity           Ass...
Accounting Equation (an illustration)           a. Student started an internet business with cash           $600 and noteb...
Accounting Equation (an illustration)           a. Student started an internet business with cash           $600 and noteb...
Accounting Equation (an illustration)           a. Student started an internet business with cash           $600 and noteb...
Accounting Equation (an illustration)           a. Student started an internet business with cash           $600 and noteb...
Changes in Owner’s Equity                              OWNER’S EQUITY                 decreased by             increased b...
Introduction to Financial Accounting                       Topic 1: Introduction                            Summary      1...
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Topic1 introductiontutorialslides studentsversion

  1. 1. Introduction to Financial Accounting Topic 1: Introduction Learning Objectives 1. Define accounting 2. Identify users of accounting information 3. The accounting profession 4. Describe 3 types of business organisations 5. State 3 types of business activities 6. Define Assets, Liabilities & Owner’s Equity 7. State the Accounting EquationApr 2011 C1 - 1
  2. 2. What is accounting? An information system that provides reports to stakeholders (users or interested parties) about the economic activities and condition of a business.Apr 2011 C1 - 2
  3. 3. Accounting — An Information System Identification of UsersApr 2011 C1 - 3
  4. 4. Accounting — An Information System Identification of Users User Information NeedsApr 2011 C1 - 4
  5. 5. Accounting — An Information System Identification of Users User Information Needs Accounting SystemApr 2011 C1 - 5
  6. 6. Accounting — An Information System Identification of Users User Information Needs Economic Data Accounting and Activities SystemApr 2011 C1 - 6
  7. 7. Accounting — An Information System Identification of Users User Information Needs Economic Data Accounting and Activities System ReportsApr 2011 C1 - 7
  8. 8. Accounting — An Information System Identification of Users User Information Needs Economic Data Accounting and Activities System User Reports DecisionsApr 2011 C1 - 8
  9. 9. Why do we study accounting? • Accounting is the language of business. • Accounting provides information. • To who? Owners, managers and other business stakeholders • What information? How the business is performing e.g. Coca ColaApr 2011 C1 - 9
  10. 10. How to Study Accounting in NP? • Introduction to Financial Accounting (INFA) 1st semester • INFA, FFA, IFA, RFA, AFA modules • 3 years of study to generate financial reports or statements • INFA Module Outline and Teaching ScheduleApr 2011 C1 - 10
  11. 11. Users of Accounting Information • investors • Bankers Financial Accounting • creditors EXTERNAL USERS • Regulators /government • customers Managerial Accounting INTERNAL USERS • owners • managers • employeesApr 2011 C1 - 11
  12. 12. The Accounting Profession Public Private accounting accounting Serves general public Works for a single organisation Auditing Cost accounting Tax accounting Budgeting Management consultancy Information systems design Insolvency Internal auditing Financial accounting Management accountingApr 2011 C1 - 12
  13. 13. What is a business? • A business is an organisation in which basic resources (inputs) are assembled and processed to provide goods or services (outputs) to customers. Customers pay for these goods or services. • Singapore Telecoms, Robinsons, MacDonalds • Provision shops, gift shops, beauty salons, restaurants, law firms, clinicsApr 2011 C1 - 13
  14. 14. Types of business organisations • Sole proprietorship • Partnership • CompanyApr 2011 C1 - 14
  15. 15. Types of businesses • Manufacturing business • Trading business • Service businessApr 2011 C1 - 15
  16. 16. Assets • What are your assets?Apr 2011 C1 - 16
  17. 17. Asset Assets • Resources owned by the business • Items of value owned by the business • Eg - cash, buildings, equipmentApr 2011 C1 - 17
  18. 18. Liability Liabilities • Amounts owed by a business to external parties. • Examples – Creditors / Accounts Payable Salaries Payable LoansApr 2011 C1 - 18
  19. 19. Liability Liabilities • Say you borrowed $5 from your friend for Your friend lunch. You take on a You liability or debt of $5. You friend becomes your creditor. Liability- $5 Your creditorApr 2011 C1 - 19
  20. 20. Owner’s equity Owner’s Equity/Capital • Amount of owner’s interest/investment in the business • Amount owed by the business to the owner • Say Sally puts $10,000 cash into the business. Therefore $10,000 of the business belongs to Sally. Owner’s equity = $10,000Apr 2011 C1 - 20
  21. 21. The Accounting Equation Relationship between the total assets, total liabilities and total owner’s equity of a businessApr 2011 C1 - 21
  22. 22. The Accounting Equation Resources What are an organization’s resources called?Apr 2011 C1 - 22
  23. 23. The Accounting Equation Resources = Sources Assets What are the Resources used sources of in the business these assets?Apr 2011 C1 - 23
  24. 24. The Accounting Equation Resources = Sources Liabilities Assets Owner’s Equity/Capital Resources Resources used supplied by in the business creditors and ownersApr 2011 C1 - 24
  25. 25. The Accounting Equation Assets = Equities Assets = Liabilities + Owner’s Equity Assets - Liabilities = Owner’s EquityApr 2011 C1 - 25
  26. 26. Accounting Equation (an illustration) a. Student started an internet business with cash $600 and notebook $3,100. Borrowed money from parents $2,000. ASSETS LIABILITIES = OWNER’S EQUITYApr 2011 C1 - 26
  27. 27. Accounting Equation (an illustration) a. Student started an internet business with cash $600 and notebook $3,100. Borrowed money from parents $2,000. ASSETS LIABILITIES Cash $600 + = OWNER’S EQUITY Notebook $3,100Apr 2011 C1 - 27
  28. 28. Accounting Equation (an illustration) a. Student started an internet business with cash $600 and notebook $3,100. Borrowed money from parents $2,000. ASSETS LIABILITIES Loan Cash $2,000 $600 + = OWNER’S EQUITY Notebook $3,100Apr 2011 C1 - 28
  29. 29. Accounting Equation (an illustration) a. Student started an internet business with cash $600 and notebook $3,100. Borrowed money from parents $2,000. ASSETS LIABILITIES Loan Cash $2,000 $600 + = OWNER’S EQUITY Notebook Capital $3,100 $1,700 (600+3,100-2,000)Apr 2011 C1 - 29
  30. 30. Changes in Owner’s Equity OWNER’S EQUITY decreased by increased by Owner’s Owner’s withdrawals/Drawings investments/Capital Expenses Revenues Revenues less Expenses = Business Profits Inflow of cash or increase in Outflow of cash or increase in creditors debtors from outflow of from inflow of services or goods services or goodsApr 2011 C1 - 30
  31. 31. Introduction to Financial Accounting Topic 1: Introduction Summary 1. Define accounting 2. Identify users of accounting information 3. The accounting profession 4. Describe 3 types of business organisations 5. State 3 types of business activities 6. Define Assets, Liabilities & Owner’s Equity 7. State the Accounting EquationApr 2011 C1 - 31

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