2. Learning Outcomes
At the end of this module, students will be able to
describe terms in financial accounting
describe key financial accounting concepts
prepare the important financial statements:
profit and loss account, balance sheet, and
cash flow statement
prepare financial statements using computer-
assisted accounting system
3. NOTES
Software: TurboCash open source accounting tool
Lecture materials: available at
http://www.dwmbeancounter.com/moodle/ -
students must create an online account.
Assessment: Assessment: 50% on final
examination and 50% on assignments
4. Business
• What is a business ?
• What are the objective of a business entity?
• What are the different types of businesses ?
• Who are the parties involved?
5. Business – objectives/types/forms
Objective is making profit
Types of business –
Service
Manufacturing
Trading
Forms of business organization
Sole proprietorship
Partnership
Company
6. Sole proprietorship
One person
Many professional services – lawyers, doctors,
Retail and small business entities
Accounting point of view – business entity is
separated from the owner
Legal point of view- owner is personally liable for
the debts of the business
7. Partnership
Two or more persons
Partnership agreement
Accounting point of view – business entity is
separated from the owners
Legal point of view- owners are personally liable
for the debts of the business
8. Company
An artificial person
Owners are known as shareholders
Liability is limited – unpaid share capital
Limited – Ltd
Private limited company
Public limited company
9. Accounting
Accounting is the process of designing and
operating an information system for collecting,
analyzing, and recording of business
transactions and summarizing and
communicating the results of these transactions
to users to facilitate the making of economic
decisions.
Accounting is also known as language of
business.
10. Accounting
Accounting - the process of identifying, measuring
and communicating economic information to
permit informed judgments and decision by
users of the information.
11. Economic/financial information
Examples-
• What are economic events ? Examples ?
• What are economic information ? Examples?
• Who are the interested parties and why?
• External parties
• Internal parties
12. External Parties
• Investors – good investment ?
• Creditors – creditworthiness ? Safe to give
loans ? How much and how long ?
• Government – Tax liability ?
• Customers – Entering into contracts?
• General public – performance ?
• Other users – who and why?
• Regulators – e.g. CSE (Colombo Stock
Exchange)
13. Internal parties
• Senior mangers – managing business
• Employees – profitability and profit sharing
14. Book keeping
Book keeping – Collecting, analyzing, and
recording business transactions.
• Mechanical and Repetitive
Accounting is more than book keeping. It involves
analyzing, recording, summarizing, reporting,
reviewing, and interpreting financial information
15. Accounting
Financial accounting - focuses on the specific
needs of decision makers external to the
organization, such as stockholders, suppliers,
banks, and government agencies.
Management accounting – concerned with the
preparation and presentation of information to
assist managers.
18. Role of an accountant
Auditing –
• Express the true and fair view of financial
statements
• Independent examiner
Taxation – various types of taxes including excise
and custom duty
19. Role of an accountant
Management advisory services-
• Investigate problems
• Suggest corrective actions (quality control,
acquisitions of and merging with)
Cost accounting – allocating and controlling cost
of production for a product or service
Budgeting – forecast of future operations
Internal auditing – comply with the established
procedures and policies
Information security auditors -
21. Regulations
Company registration act
Stock exchange listing
Accounting standards
Buy 10 units @15 = 150
Buy 10 units @ 18 = 180
Sell 5 units @ 20 = 100
What is the profit ?
22. Procedures
Sri Lanka Accounting Standards (SLAS)
Sri Lanka Auditing Standards (SLAuS)
International Accounting Standards (IAS)
Generally Accepted Accounting Principles
(GAAP)
Why standards ? Advantages ?
23. Some concepts
Matching principle- matching revenues against all
expenses incurred in earning those revenues.
Going concern principle- business entity will
continue to operate in the near future.
Historical cost principle- cost are recorded at
actual cost or price paid.
Accounting period- prepared for each financial
yea.
Accounting entity- clearly defined accounting
entity.
Editor's Notes
You have studies economics.
As shown in color RED, accounting is very much related to information systems. You study information systems in through out 3 or 4 years. In the first year, you learnt JAVA, a programming language that is used to develop information systems. You also learnt system and analysis and design, which study and design information systems. Now, you learn accounting in order to design and develop or use accounting information systems.