Lesson 1: The Purpose Of
Accounting
Done By Shehara Perera F4
Friday, August 11, 2023
What is the purpose of
Accounting ?
To the viewersNOTE: Please watch
this video as it has been
attached in below.
01
Introduction of Accounting(Further in
discussed in presentation)
02
Identifying what is
Assets,Liabilities,Capital
03
Accounting Equation
Contents
1.1
Introduction To Accounting
Accounting can be known as a language of business
You may, ask what does accounting communicate
Well, it communicates information required by interested parties
(also known as stakeholder) within outside of an business in order
to make decisions.
Shareholders can divide into 2 namely;
Internal
Stakeholders
External
Stakeholders
Internal Stakeholders
Managers
Employees
Investors
Board of Directors
External Stakeholders
Customers
Suppliers
Competitors
Bank
 Each of the above party takes decision in various nature and for that
they require information. Accordingly, providing information for
decision making is the prime objective of Accounting. Based on the
above objective there are also Secondary objectives such objectives are
given as below;
 To asses the level of profitability
 To know finical position of the business
 To measure and monitor the progress of the
business(comparing the financial statements of one
year with those previous years or with those of other
similar businesses)
 To plan future developments of the business
 In order to fulfil legal requirements
FACT:
Luca Pacioli
Is referred as father of
bookkeeping
Bookkeeping
To the viewersNOTE: Please watch
this video as it has
been attached in below.
Objectives of Bookkeeping
 To have permanent record of all the business transactions.
 To keep records of incomes and expenses in such a way that profit or
loss may be calculated.
 To keep records of assets and liabilities in such a way that the
financial position of the business may be ascertained.
Bookkeeping VS Accounting
Income Statement
 Income Statement that represents that revenue and expenditure of a business in order to
assess the profit ability over a period of time.
Outcomes
of an
Income
Statement
Profit
Owner is receiving
return on his investment
 Profit allows growth
 Profit improves
livelihood
Loss
 Loss reduce operations
 Loss leads to
bankruptcy
Statement of Financial Position
 The statement that provides a snapshot or an overview of a business’s financial
position at given point of time.
 Financial position statement provides a snapshot of it;
Assets-What a
business owns and
what it owns
Liabilities&:What a
business owes to
other parties
Equity: What a
business owns to its
owner
Process of Accounting
Source Document
Prime Entry
Ledger
Bookkeeping tasks of Bookkeeper
Trial Balance
Bookkeeping tasks of Bookkeeper
Financial
Statements
Analysis
&Interpretation
Accounting tasks of Accountant
Thank You And May God Bless
You!