Introduction to financial accounts

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Introduction to financial accounts

  1. 1. INTRODUCTION TOINTRODUCTION TO FINANCIAL ACCOUNTSFINANCIAL ACCOUNTS
  2. 2. DefinitionsDefinitions  Accounting is the art of recording,Accounting is the art of recording, classifying and summarizing in aclassifying and summarizing in a significant manner and in terms ofsignificant manner and in terms of money, transactions and eventsmoney, transactions and events which are, in part at least, of awhich are, in part at least, of a financial character, and interpretingfinancial character, and interpreting the results thereofthe results thereof  Book keeping is the science and artBook keeping is the science and art of correctly recording in the books ofof correctly recording in the books of account, all those businessaccount, all those business transactions that results in thetransactions that results in the transfer of money or money’s worthtransfer of money or money’s worth
  3. 3. Users of Financial informationUsers of Financial information  ManagersManagers  OwnersOwners  InvestorsInvestors  Government and regulatory authorityGovernment and regulatory authority  Banks and Financial institutionsBanks and Financial institutions  SuppliersSuppliers  EmployeesEmployees  ResearchersResearchers  The publicThe public
  4. 4. Objectives of AccountingObjectives of Accounting  To keep systematic recordTo keep systematic record  To ascertain the result ofTo ascertain the result of operationsoperations  To ascertain financial position ofTo ascertain financial position of the businessthe business  To protect business propertyTo protect business property  To facilitate rational decisionTo facilitate rational decision makingmaking
  5. 5. Role and activities of anRole and activities of an AccountantAccountant  He is a one who Is engage in accountsHe is a one who Is engage in accounts keepingkeeping  He is functionary who aids controlHe is functionary who aids control  He is fiscal adviserHe is fiscal adviser  He verifies, authenticates, and certifies theHe verifies, authenticates, and certifies the accounts of an entityaccounts of an entity  He produce an income statement andHe produce an income statement and balance sheet for an accounting periodbalance sheet for an accounting period  He is a professional whose primary dutiesHe is a professional whose primary duties are concerned with informationare concerned with information management for internal and external usemanagement for internal and external use
  6. 6. Accounting personnelAccounting personnel  Internal auditorInternal auditor  ControllerController  TreasurerTreasurer  Finance officerFinance officer
  7. 7. Accounting ConceptsAccounting Concepts These are the basic assumptions upon which the science ofThese are the basic assumptions upon which the science of accounting is basedaccounting is based  Business entity conceptBusiness entity concept  Money measurement conceptMoney measurement concept  Going concern conceptGoing concern concept  Cost conceptCost concept  Accrual conceptAccrual concept  Concept of conservatismConcept of conservatism  Materiality conceptMateriality concept  Consistency conceptConsistency concept  Periodicity conceptPeriodicity concept
  8. 8. Changing nature of generallyChanging nature of generally accepted accounting principlesaccepted accounting principles (GAAP)(GAAP)
  9. 9. Accounting cycleAccounting cycle  Identification of transactionsIdentification of transactions  Business documentsBusiness documents  Recording transactionsRecording transactions  PostingPosting  Trial balanceTrial balance  Adjustment entriesAdjustment entries  Closing entriesClosing entries  Final accountsFinal accounts  Reverse entriesReverse entries
  10. 10. Personal AccountPersonal Account DEBIT=the receiverDEBIT=the receiver CREDIT= the giverCREDIT= the giver
  11. 11. Real AccountReal Account  DEBIT= what comes inDEBIT= what comes in  CREDIT- what goes outCREDIT- what goes out
  12. 12. Nominal AccountNominal Account  DEBIT= expanses and lossesDEBIT= expanses and losses  CREDIT= incomes and gainsCREDIT= incomes and gains

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