Introduction to Financial Accounting 1

1. WELCOME
Week 1: Introduction to Financial Accounting

3. DEFINE ACCOUNTING
Accounting is the process of identifying,
analyzing and recording the economic
transactions of a business to produce
financial reports for internal and external
users of the information.

4. ACCOUNTING GOAL
• The goal of accounting is to ensure
information provided to decision
makers is useful.

5. FORMS OF BUSINESS TRANSACTIONS
Forms
of
business
organizations
Proprietorship
Partnership
Corporation

6. PROPRIETORSHIP
• A proprietorship is a business
owned by one person and is not a
separate legal entity and has
unlimited liability.

7. IDENTIFY AND EXPLAIN THE GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
(GAAP)
Underlying accounting
concepts and principles
to establish ethical
standards.
Useful information is
relevant and faithfully
represent a business’s
economic activities .
Accounting Goal: Provide
useful information for
decision making
These underlying accounƟng concepts
or principles are known as Generally
Accepted AccounƟng Principles (GAAP)

8. GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
GAAP is based on Financial Reporting
Standards (IFRS) for publicly
accountable enterprises (PAE).
IFRS are issued by the International
Accounting Standards Board (IASB)
The IASB’s mandate is to promote the adoption of
a single set of global accounting standards through
a process of open and transparent discussions
among accounting firms, corporations and financial
institutions.
Generally accepted Accounting
Principles (GAAP)

9. ACCOUNTING PRACTICES ARE GUIDED BY
GAAP WHICH ARE COMPRISED OF
QUALITATIVE CHARACTERISTICS AND
PRINCIPLES
GAAP
Relevance
Faithful
Representation
Comparability
Verifiability
Timeliness
Understandability

10. 9 PRINCIPLES WHICH SUPPORT THE QUALITATIVE CHARACTERISTICS
Business Entity
• Business should maintain separate records.
Consistency
• Business should use the same policies and procedures from one period to the next.
Cost
• Economic transactions should be based on historical cost.
Full Disclosure
• Accounting information should communicate enough information to allow effective decision making.

11. 9 PRINCIPLES WHICH SUPPORT THE QUALITATIVE
CHARACTERISTICS CONT’D
Going Concern
• Assumes the business will continue to the foreseeable future
Matching
• Transactions should be recorded in the period in which they occurred.
Materiality
• Apply proper accounting only for transactions which affect decision making.
Monetary
• Requires that financial information be communicated in stable units of money
Recognition
• Revenues are recorded when earned and expenses are recorded when incurred.

12. THE 4 FINANCIAL STATEMENTS
• Financial accounting aims to communicate
information to external users using financial
statements. There are four financial
statements:
• the income statement
• statement of changes in equity
• balance sheet
• statement of cash flows.

13. WHAT’S NEXT
We will work
through the 4
financial
statements starting
with Income
Statement

14. THANK YOU FOR WATCHING! THE
END