Financial Accounting
The Basis for Business Decisions
Lecture 1 – BBA2K23 By: Hassan Ali - Lecturer
Sindh University Campus, Thatta
Financial Accounting
Chapter 1
Accounting:
Information for Decision Making
Accounting: Information for Decision Making
Learning Objectives
 Defining Basics of Accounting (Language of Business)
 Process of Accounting
 Types of Accounting and Accounting Information
 Basic Functions of Accounting Information
 Internal Control and Its Components
Accounting: Information for Decision Making
What is Accounting…?
 The Language of Business…
 It is the art of Recording, Classifying,
Summarizing and Communicating the
results of business transactions.
 It is process of interpreting, measuring
and communicating the results of financial
activities.
Accounting: Information for Decision Making
What is Accounting…?
 Accounting is one of the key functions of almost
any business.
 Regardless of the size of a business, accounting is
a necessary function for decision making, cost
planning, and measurement of economic
performance.
 It may be handled by a bookkeeper or an accountant
at a small firm, or by sizable finance departments
with dozens of employees at larger companies.
Accounting: Information for Decision Making
Accounting Process
Accounting
Process
Economic
Activities
Actions
(Decisions)
Accounting links decision
makers with economic
activities and with the
results of their decisions
Decision
Makers
Accounting
Information
Reported
Results of
Actions
(Decisions)
Accounting: Information for Decision Making
Types of Accounting Information
Financial
Management
Tax
Accounting: Information for Decision Making
Types of Accounting Information
Financial Accounting:
Financial Accounting refers to
information describing the financial
resources, obligations, and activities
of an economic entity (organization or
individual).
Accounting: Information for Decision Making
Types of Accounting Information
Management Accounting:
Management accounting involves the
development and interpretation of
accounting information intended
specifically to assist management in
operating the business.
Accounting: Information for Decision Making
Types of Accounting Information
Tax Accounting:
Tax accounting is a specialized field
within accounting and focuses on the
preparation of income tax returns and
tax planning strategies.
Accounting: Information for Decision Making
Accounting System
An accounting system consists of
the personnel, procedures,
technology, and records used by an
organization to develop accounting
information and to communicate
this information to decision
makers.
Accounting: Information for Decision Making
Accounting System
Information System
Information Users







Investors
Creditors
Managers
Owners
Customers
Employees
Regulators
SEC, IFRS, FATF
Financial Information
 Profitability
 Financial position
 Cash flows
Decisions Supported







Performance Evaluations
Stock Investments
Tax Strategies
Labor Relations
Resource Allocations
Lending Decisions
Borrowing Decisions
Accounting: Information for Decision Making
Basic Functions of Accounting System
1. Interpret and
record
business
transactions.
2. Classify similar
transactions
into useful
reports.
3. Summarize and
communicate
information to
decision makers.
Accounting: Information for Decision Making
Components of Internal Control
1. Control Environment
2. Risk Assessment
3. Control Activities
4. Information and Communication
5. Monitoring
Accounting: Information for Decision Making
Components of Internal Control
1. Control Environment:
Control Environment is the foundation for all the other
elements of internal control, setting the overall tone for the
organization.
Accounting: Information for Decision Making
Components of Internal Control
2. Risk Assessment:
Identifying, analyzing, and managing those risks that pose a
threat to the achievement of the organization’s objectives.
Accounting: Information for Decision Making
Components of Internal Control
3. Control Activities:
Policies and procedures that management puts in place to
address the risks identified during the risk assessment
process.
Accounting: Information for Decision Making
Components of Internal Control
4. Information and Communication:
Information
systems
developed
to
capture
and
communicate operational, financial, and compliance-related
information for business.
Accounting: Information for Decision Making
Components of Internal Control
4. Monitoring:
Monitoring enables the company to evaluate
effectiveness of its system of internal control.
the
Accounting: Information for Decision Making
End of Lecture 1