Basic Accounting

• Recording transactions in journal entries is the first stage of the accounting cycle.
• • According to the American Institute of Certified Public Accountants [AICPA]; Accounting is

  the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events, that are, in part at least, of a financial character and interpreting the results thereof.
• Luca Pacioli in 1494

  ‘the father of bookkeeping and accounting’

  'double entry bookkeeping system'
• Branches of Accounting

  Financial Accounting

  Management Accounting

  Auditing

  Tax Accounting

  Fund Accounting

  Forensic Accounting
• American Institute of Certified Public Accountants (AICPA): 'Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events, that are, in part at least, of a financial character and interpreting the results thereof'
• American Accounting Association (AAA): 'Accounting refers to the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information'
• Luca Pacioli first properly described the double entry bookkeeping system


  1494
• Branches of Accounting


  • Financial Accounting
  • Management Accounting
  • Auditing
  • Tax Accounting
  • Fund Accounting
  • Forensic Accounting
• Financial Accounting

  • Supplies information internally within the organization and to external stakeholders including shareholders, creditors, and government/regulatory agencies
• Management Accounting

  • Emphasizes the preparation and analysis of accounting information within the organization
• Auditing

  • Examination and verification of company accounts and the firm's system of internal control
• Tax Accounting

  • Based on laws enacted through the legislative process to help entities minimize their tax payments
• Fund Accounting

  • Used for nonprofit entities, including governments and not-for-profit corporations, to deploy resources to achieve their objectives
• Forensic Accounting


  • Use of accounting in legal matters, including litigation support, investigation, and dispute resolution
• Internal Users


  People within a business organization who use financial information
• External Users

  Typically called financial accounting users, use the record of a business’ financial history for various purposes
• Forms of Business Organizations

  • Sole Proprietorship
  • Partnership
  • Corporation
• Sole Proprietorship

  • The simplest business form where one person operates the business and is personally responsible for its debts
• Advantages of Sole Proprietorship

  • Owners can establish it instantly, easily, and inexpensively
• Types of business forms

  • Sole Proprietorship
  • Partnership
  • Corporation
• Sole Proprietorship

  The simplest business form where a natural person owns the business and is personally responsible for its debts
• Partnership

  Formed when two or more persons engage in a business enterprise for profit
• Corporation


  A legal entity that protects its owners from personal liability for corporate debts and obligations
• GAAP (Generally Accepted Accounting Principles) is the framework and guidelines of the accounting profession
• Basic accounting principles and concepts


  • Business Entity
  • Going Concern
  • Monetary Unit
  • Historical Cost
  • Matching
  • Accounting Period
  • Conservatism
  • Consistency
  • Materiality
  • Objectivity
  • Accrual