Accounting
Financial reports should be:
Understandable
Reliable
Relevant
Complete
Well-informed management is vital for the survival of a busines
organization
Financial Reporting Standards Council defined accounting as a service
activity. It is to provide quantitative information, primarily financial in
nature, about economic entities, that is intended to be useful in making
economic decision.
American Institute of Certified Public Accountants (AICPA), it is 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 and interpreting the results thereof
Qualitative Characteristic of financial information
Relevance
*predictive value
*confirmatory value
Faithful representation
*Completeness
*Neutrality
*Free from errors
Enhancing Qualitative Characteristics
Comparability
Verifiability
Timeliness
Understandability
Users of Accounting Information
Internal users- sole proprietors, partners, management groups and
employees
External users - investors, trade creditors, banks
Forms of Business organization
Single or Sole Proprietorship
Partnership
Corporation
Types of business operations
Service business
*public transport, beauty parlors, security agencies, janitorial services
Merchandising business
*groceries, drugstore, car dealers, real estate, appliance stores,
Manufacturing business
produces the goods that it sells to its customers
Specialized Accounting fields
Public Accounting
Services offered by CPAs in public practice are:
*Auditing
*Tax Service
*Management advisory services or management consulting
Private Accounting
Accounting Education
Government
Basic Financial Statements
Statement of Financial Position
formerly known balance sheet
elements of financial position
Assets,
liabilities
owners equity
Income statement
also known as statement of profit and loss and other comprehensive
income
elements of income statement
income
expenses
Statement of change in equity
Cash flow