L6 Accounting

• In 1494, the first book of double entry accounting was published.
• The "Father of Accounting" is Luca Pacioli
• Pacioli simply described a method used by merchants in venice during the italian renaissance
• Significance and Limitations of Accounting Information:

  It identifies the economic resources of a business

  It helps to decide on the amount and certainty of cash for investment and credit decisions
• The Accounting Cycle:

  Journalize all transactions chronologically

  Post to Ledger

  Prepare a Trial Balance

  Make end of period adjustments

  Prepare an adjusted Trial Balance

  Prepare a full set of financial statements

  Journalise closing entries

  Prepare closing Trial balance
• A benefit of the accrual basis method is that the statement of financial position is more accurate.
• Accounting standards are principles that guide and standardize accounting practices
• The International Accounting Standards Committee (IASC) was formed in 1973.
• the role of the IASC is to:

  Develop and promote uniform international accounting standards

  Allow accounting information to be compared across the world

  Coordinate the standard setting process
• In 1983, all members of the International Federation of Accountants Committee (IFAC) became members of the IASC
• In 2001, The IASC was replaced by the International Accounting Standards Board (IASB)
• The objective of the IASB:

  To formulate and publish accounting standards to be used in presentation of financial statements and to promote their worldwide acceptance and observance.

  They sought to improve and harmonize regulations
• All standards released under the IASC(1973-2001) are called International Accounting Standards while all standards released under the IASB are called International Financial Reporting Standards
• Due Process refers to a series of procedures that entail the collection, processing, and communication of financial data at the end of each accounting period.
• Steps of Due Process:

  The IASB sets up a steering committee

  The committee identifies issues

  The committee studies national and regional requirement and practices

  The committee presents a point outline

  The point outline is converted into an exposure draft

  If approved, the exposure draft then becomes an International Financial Reporting Standard
• Generally Accepted Accounting Principles (G.A.A.P) is a set of rules accountants follow to ensure financial statements are accurate and reliable.
• Electronic data processing environment refers to the processing of business data using a computer and its program in an environment involving electronic communication.
• where to implement internal controls:

  Hardware- conduct regular maintenance, ensure physical protection

  Software-Reduced chances of human era, lost records and viruses

  Data- use passwords,encryption and other means to restrict access

  Administration- ensure that there is clear establishment of responsibility for personnel and divisions
• Baskets transactions refer to transactions in which more than one asset is acquired in exchange for a lump sum.
• A liability refers to an entity's obligation to pay for goods acquired or services rendered in the future