Download - Intro to Financial Accounting
-
7/29/2019 Intro to Financial Accounting
1/28
INTRO TO FINANCIAL
ACCOUNTING
Janice Rhea P. Cabacungan
1st Lecture
-
7/29/2019 Intro to Financial Accounting
2/28
Objectives:
1. Define Accountancy
2. Identify the principles of accountancy
3. Define Accounting
4. Identify accounting process
5. Accounting Language of Business
6. Accounting Eyes of the Business
7. Users of Accounting Information
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
3/28
Accountancy
is the process of communicating financial
information about a business entity to users
such as shareholders and managers. The
communication is generally in the form offinancial statements that show in money terms
the economic resources under the control of
management; the art lies in selecting the
information that is relevant to the user and is
reliable.
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
4/28
Accountancy
is a branch of mathematical science that is
useful in discovering the causes of success
and failure in business
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
5/28
Application of the principles of
accountancy
are applied to business entities in three
divisions of practical art, named accounting,
bookkeeping, and auditing
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
6/28
Our focused is on Accounting
and Bookkeeping
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
7/28
Accounting
A service activity. Its function is to provide
quantitative information, primarily financial in
nature, about economic entities, that is
intended to be useful in making economicdecision.
Accounting Standard Council (ASC)
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
8/28
Accounting
"the art of recording, classifying, and
summarizing in a significant manner and in
terms of money, transactions and events which
are, in part at least, of financial character, andinterpreting the results thereof.
American Institute of Certified PublicAccountants (AICPA)
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
9/28
Accounting
The process of identifying, measuring and
communicating economic information to permit
informed judgments and decisions by users of
the information.
American Accounting Association (AAA)
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
10/28
Bookkeeping
Is the recording (recordkeeping ) function of
the accounting process; a bookkeeper enters
accounting information in the companys
books.
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
11/28
Accounting
Process
Financial Information
Assets= Liabilities +
Owners Equity
Profit /Loss = Revenue-
Expenses
Communicat
ed to
DECISION
MAKERS
InternalManagemen
t
External:
InvestorsCreditors
Customers
Governmen
t
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
12/28
Accounting Process
A. Recording
B. Classifying
C. Summarizing
D. Interpreting
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
13/28
A. Recording
This function deals with the writing on the
books or records of the business transactions
or events. This is technically referred as
BOOKKEEPING. Bookkeeping is the systematic and
chronological recording of business
transactions or events.
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
14/28
Classifying
In the recording and summarizing functions,
similar items are grouped or sorted .
Example: A store dealing in the buying and
selling of coats, shirts, shoes and slippers invarious sizes, colors and etc may have group
as sales-coats, sales-shirts, sales-shoes and
sales- slippers.
Or simply: SALES
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
15/28
Summarizing
The accountant groups summarizes thedetails of the data in accounting recordspreparatory to the submission of reports to themanagement, this is normally periodically.
yearly
monthly
quarterly
semestrally
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
16/28
Interpreting
Due to technical and specialized nature of
accounting, reports and statements submitted
by the accountant require further interpretation
for the guidance of management. In thisfunction, the accountant usually prepares
additional explanatory reports. (Notes to
financial statement)
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
17/28
The Language of theBusiness Common Business Questions?
A. How much is the increase in capital as a resultof business operation ?
(Profitability) B. Are there available funds to finance the
business operation?
(Liquidity)
C. Can the business pay its long term obligationsto others?
(Solvency)
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
18/28
D. Can the business sustain its long termprofitability and cash flow?
(Stability)
E. How much borrowed capital and ownerscapital are invested in the business?
(Capital Structure)
F. Is there excess cash available forinvestment opportunities and otheruncertainties?
(Financial Flexibility)
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
19/28
The eyes of the business
Bookkeeping records the initial part of
accounting activities, enable the owner of a
business to check on his financial progress
Adequate accounting records assist the ownerto prepare plans for the future.
Auditing, an advanced part of accounting
activity, verifies the truthfulness of the financialreports concerning the business results of
operation and financial conditioning.
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
20/28
Users and Types of Financial
Reports
Users:
Internal and External Users
Types:
Internal and External Financial Reports
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
21/28
Internal Financial Reports
Are usually prepared exclusively for the use of
management to effectively and efficiently operate
and control the activities of the business.
These reports contain a more detailed accountinginformation that helps management make
operating decisions directed toward meeting the
business goals. Internal financial reports are not
governed by the generally accepted accountingprinciples.
The area of accounting that is concerned with
internal reporting is referred to as management
accounting. by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
22/28
Examples:
Variance analysis of cost of production,
differential cost report of capital budgeting.
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
23/28
External Financial Reports
Are usually prepared for those who have no
direct access to management of the business,
such as the government regulatory agencies,
creditors , labor unions, etc. The preparation ofthese reports is governed by the generally
accepted accounting principles.
The area of accounting that is concerned with
the preparation and presentation of external
reports is referred to as Financial accounting.
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
24/28
Examples:
Balance sheet, income statement and cash
flows statement.
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
25/28
USERS OF ACCOUNTING
INFORMATION
INTERNALUSERS
ManagementGroup
Sole ProprietorsBOR
OfficersManagers
Supervisors
ExternalUsers
FINANCING GROUPInvestors
Potential Investors
Bank and other financinginstitutions
PUBLIC GROUP
Government
Regulatory Agencies
Taxing Authorities
Labor Unions
Employees
Retirees
Economic Planners
Customers
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
26/28
Advantages of Accounting
1. Aid to management it provides financial
information to the management to do its daily
work properly and efficiently.
2. Reference it removes the limitation ofmemory by recording business transactions
chronologically , serves as future reference,
facilitates comparative study of business
financial status, and helps in assessing the
value of the business at the time of sale.
by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
27/28
Advantages of Accounting
3.Basis for tax assessment. It helps in
assessing the tax liability of the organization
regarding income taxes, sales taxes and other
business taxes. 4. Evidential matter. It serves as a good
evidence in the court of law or legal
investigation.
5. Tool to evaluate management performance.
It helps businessman know the true status of
the business in terms of the results obtained
and the financial condition of the business.by: Janice Rhea P. Cabacungan
-
7/29/2019 Intro to Financial Accounting
28/28