‫موسسه آموزش عالی آزاد عصر دین و دانش‬
‫جزوه درس‪:‬‬
‫نام استاد‪ :‬واصفی‬
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1) Financial and Managerial Accounting
Financial accounting is concerned with the measuring and recording of
transactions for a business enterprise and the periodic preparation of various
reports from such records. Corporate enterprises must use generally accepted
accounting principles in preparing their annual financial statements. Managerial
accounting uses both historical and estimated data to assist management in
conducting and evaluating current operations and in planning future operations.
The principle of "usefulness" is dominant in guiding the accountant in preparing
management reports.
2) Development of Financial Accounting Concepts and Principles
As the American economy developed and as business organizations grew in size
and complexity, there came an awareness of the need for a framework of
concepts and generally accepted accounting principles to serve as guidelines for
the preparation of the basic financial statements. These principles represent the
best possible guides, based on reason, observation and experimentation to help
make accounting data more useful in an ever-changing society. Currently, the
Financial Accounting Standards Board establishes accounting standards for
business enterprises. The Governmental Accounting Standards Board has
responsibility for establishing accounting standards to be followed by state and
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municipal governments. Among other organizations which have had an effect
on the development of accounting principles are the American Institute of
Certified Public Accountants, the American Accounting Association, the
Security and Exchange Commission, the Internal Revenue Service, the
Financial Executives Institute and the National Association of Accountants.
3) Basic Accounting Principles and Guidelines
Since GAAP (Generally Accepted Accounting Principles) is founded on the
basic accounting principles and guidelines, we can better understand GAAP if
we understand those accounting principles. The following is a list of the some
main accounting principles and guidelines together with a highly condensed
explanation of each.
Economic Entity Assumption
The accountant keeps all of the business transactions of a sole proprietorship
separate from the business owner's personal transactions. For legal purposes, a
sole proprietorship and its owner are considered to be one entity, but for
accounting purposes they are considered to be two separate entities.
Monetary Unit Assumption
Economic activity is measured in U.S. dollars, and only transactions that can be
expressed in U.S. dollars are recorded.
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Because of this basic accounting principle, it is assumed that the dollar's
purchasing power has not changed over time. As a result accountants ignore the
effect of inflation on recorded amounts. For example, dollars from a 1960
transaction are combined (or shown) with dollars from a 2013 transaction.
4) Financial Accounting Concepts and Principles
Four of the most important accounting concepts relate to the business entity, the
cost of properties and services, business transactions, and the unit of
measurement. The business entity concept is based on the applicability of
accounting to individual economic units in society. Profit-making businesses are
customarily organized as sole proprietorships, partnerships or corporations. The
cost principle requires that properties and services purchased by a business be
recorded in terms of cost. A business transaction is the occurrence of an event
or a condition that must be recorded. Business transactions may be either simple
or complex and may lead to an event or a condition that results in yet another
transaction. All business transactions are recorded in terms of money. The use
of the monetary unit in accounting for and reporting the activities of an
enterprise assumes stability of the measurement unit.
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5) Chart of Accounts
The record traditionally kept for each item that appears on the financial
statements is the account. A group of related accounts that comprise a complete
unit, such as all the accounts of a specific business enterprise, is called the
ledger. Accounts in the ledger are numbered consecutively so as to permit easy
indexing and for use in posting. A listing of the accounts used by a specific
enterprise in its ledger is referred to as a chart of accounts.
6) Nature of an Account
The simplest form of an account is the T account. Increases and decreases in an
account are recorded as debits (entries on the left side of the account) and
credits (entries on the right side of the account). Periodically, the debits and the
credits in an account are summed and the difference between the two sums is
determined. This difference is called the balance of the account. General rules
of debit and credit have been established for recording increases and decreases
to asset, liability, owner’s equity, revenue and expense accounts. Regardless of
the complexity of a transaction or the number of accounts affected, each
transaction is recorded in a manner so that the sum of the debits is always equal
to the sum of the credits. The effects of transactions are initially entered in a
record called a journal. Periodically, transactions that have been journalized are
transferred to the accounts by a process known as posting. The sum of the
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increases recorded in an account is usually equal to or greater than the sum of
the decreases recorded in the account. For this reason, the normal balance of an
accounts indicated by the side of the account (debit or credit) that receives the
increases.
7) Trial Balance
The equality of the debits and credits in a ledger is verified periodically by the
preparation of a trial balance. The trial balance does not provide complete proof
of accuracy of the ledger, but only indicates that the debits and credits are equal.
8) Discovery and Correction of Errors
Occasional errors in journalizing and posting transactions are unavoidable. The
trial balance is one of the means for discovering such errors. However, the trial
balance indicates only that the debits and credits are equal. A journal entry that
is incorrect but not posted may be corrected by drawing a line through the error
and inserting the correct item. Likewise, if the journal entry is correct but the
posting is incorrect, a line may be drawn through the error and the correct
posting inserted. If the journal entry is incorrect and posted, the error may be
corrected by journalizing and posting a correcting entry.
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9) Materiality
In following generally accepted accounting principles, the accountant must
consider the relative importance of any event, accounting procedure, or change
in procedure that affects items on the financial statements. The concept of
materiality implies that accountants need not strictly adhere to generally
accepted accounting principles if the amounts involved are not significant.
10) Accounting period
Only in rare cases is a business organized with the expectation of operating for
only a certain period of time. In most cases, it is not possible to determine in
advance the length of the life of an enterprise, so an assumption must be made.
The going concern concept assumes that a business entity has a reasonable
expectation of continuing in business at a profit for an indefinite period of time.
The annual accounting period adopted by an enterprise is known as the fiscal
year. The period most commonly adopted is the calendar year, although other
periods corresponding to the enterprise’s natural business year may be used,
particularly for incorporated enterprises.
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11) Matching Principles
Revenues and expenses may be reported on the income statement by (1) the
cash basis or (2) the accrual basis of accounting. When the cash basis is used,
revenues are reported in the period in which cash is received, expenses are
reported in the period in which cash is paid. Most enterprises, however, use the
accrual basis of accounting. Under the accrual method, revenues are reported in
the period in which they are earned, and expenses are reported in the period in
which they are incurred in the process of generating revenues. The accrual basis
of accounting requires the use of an adjusting process at the end of the
accounting period to match properly the revenues and expenses within the
period.
12) Nature of the Adjusting Process
At the end of the accounting period, some of the amounts listed on the trial
balance are not necessarily correct. For example, amounts listed for prepaid
expenses are normally overstated because the day-to-day consumption or
expiration of these assets has not been recoded. Likewise, some revenue or
expense items related to the period may not be recorded, since these items are
customarily recorded only when cash has been received or paid. The entries
required at the end of the accounting period to bring the accounts up to date and
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to insure the proper matching of revenues and expenses under the accrual
method are called adjusting entries. The posting of the adjusting entries will
bring the ledger up to date as a planned part of the accounting cycle.
13) Nature of the Closing Process
The revenue, expense, and dividends accounts are temporary accounts used in
classifying and summarizing changes in owner’s equity during an accounting
period. At the end of the period, the net effect of the balances in these accounts
must be recorded in a retained earnings account. The balances must also be
removed from the temporary accounts so that they will be ready for use to
accumulate data for the following accounting period. Both of these goals are
accomplished by the journalizing and posting of closing entries. In preparing the
closing entries, an account titled Income Summary is used for summarizing the
data in the revenue and expense accounts. The balance of this account is then
closed to the retained earnings account. Finally, the dividends account is closed
to the retained earnings account. After the closing entries have been journalized
and posted to the ledger, the balance in the retained earnings account will
correspond to the amounts reported on the retained earnings statement and
balance sheet.
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