Ch 1 introduction to accounting
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This chapter provides an overview of basic accounting concepts. It distinguishes types of business organizations, defines accounting and bookkeeping, and identifies users and uses of accounting information. The accounting cycle is also described. It involves classifying, recording, summarizing transactions, and interpreting financial statements. Bookkeeping is the mechanical recording of transactions systematically, while accounting also involves analyzing, interpreting, and communicating financial information to internal and external users for decision making.
Ch 1 introduction to accounting
- 1. Chapter 1 Introduction to Accounting
- 2. Studying this chapter should provide you with the overview of basic accounting, which this knowledge needed to: ◦ Distinguish between the different types of business organization ◦ Define, explain and differentiate the terms bookkeeping and accounting ◦ Identify the users and the uses of the accounting information ◦ Describe the accounting cycle
- 3. Particular Sole Partnership Companies Proprietorship Public Private (Bhd) (Sdn Bhd) Own by 1person 2-20 persons 2-based on ASC 2-50 members Contribution of Owner Partner Through issue Through issue Capital by -Cash or Property based on of shares of shares their -i.e motor van agreement Control and Owner or get help Partners or BOD appointed BOD appointed manage by from family by board by shareholders by shareholders Liability Unlimited Unlimited Limited Limited Legal No legal requirement Partnership Govern by Govern by requirement for its formation Agreement Companies Act Companies Act 1965 1965 Profit/losses Belong to the owner Shared Paid to Paid to based on shareholders in shareholders in sharing ratio form of form of dividend dividend
- 4. Particular Accounting Bookkeeping Definition - The art of 1classifying, - It is the mechanical 2 recording, 3summarizing of aspects of accounting transactions and business such as classifying, events in monetary terms and recording, summarizing 4 interpreting the results to of transactions interested parties to enable systematically in them to make decision. accordance with certain principles or rules. Explanation & Involve 4 stages; - Only a part of Differences a) Classifying – sorting out to accounting category i.e sales,payments - The needs of recording b) Recording-ledger,journal transactions c) Summarizing- TB,TPL,BS systematically give rise to the double entry d) Interpreting- analyzed FS principles
- 5. Particular Users Uses Internal Owner Interested in the profits earned from their investment in the business and the Users & Uses financial stability. -work directly in the organization Manager To guide them in planning,organizing, and controlling the organization and analyzing the operations of the business. Employees Business ability to progress and expand and other monetary benefits that are gained from a financially stable business
- 6. Particular Users Uses External Creditors/ Interested to know whether the business can Bankers pay the amount owing to them. Users & Uses -indirectly involved with the Current & Requires information regarding the organization Potential solvency and financial strength of the investor business, its present and future earning capacity. Government For tax purposes Consumers Establishments of cost accounting controls. When there is reduction on cost production, there is reduction of the prices of goods they purchase.
- 7. 1 Source Transactions Documents 2 Journalizing Posting Ledgers 3 Journals 6 4 Yes 5 Trial Balance Adjustments 6 No Financial Statements
- 9. Thank you
- 10. Thank you