Introduction to Accounting

• Accounting


  The process of recording, summarising, analysing and interpreting financial data to make informed judgments and decisions. The record-keeping aspect of accounting is often called bookkeeping.
• Purposes of accounting


  • To assist in decision making
  • To measure wealth accumulation
  • To report on how profitably acquired funds were used
  • To invest in start up and expansion of a business
• Skills necessary for accounting

  • Basic math skills
  • Ability to process information in a deep analytical mind (analyse and interpret facts and figures)
  • High attention to detail
  • Organize and work under pressure (end of accounting period)
  • Ability to remain impartial
  • Strong communication skills
  • Strong interpersonal skills (team work)
  • IT skills (spreadsheet, accounting software e.gs quickbooks)
• Users of Accounting information

  • Internal Users/Stakeholders
  • External Users/Stakeholders
• Internal Users/Stakeholders


  People within a business who use financial information
• External Users/Stakeholders


  People outside the business who use accounting information
• Internal Users/Stakeholders


  • Owners
  • Managers
  • Employees
• External Users/Stakeholders


  • Customers
  • Suppliers
  • Creditors/lending or financial institutions
  • Potential investors
  • Government and tax authorities
  • Competitors
  • Local Community
• Owners


  They have invested personal savings etc. in setting up the business and is dependent on the business's success for his/her own livelihood
• Managers


  They will be concerned about the business's performance so that weaknesses can be identified and plans can be put in place to rectify these
• Employees


  They would analyze accounting information to know the stability of the business in terms of job security and adequacy of salary
• Customers


  Assess the financial position of the business which is necessary to maintain a stable source of supply
• Suppliers


  Who provide goods for the business to sell and are concerned with being paid on time and perhaps the business increasing their orders for their success
• Creditors/lending or financial institutions


  These persons can loan funds or goods to start or develop a business. They therefore would like to know the credit worthiness of those business
• Potential investors


  Would be concerned about the risk of investing and the potential returns
• Government and tax authorities

  To know the amount of profit being made so that an accurate assessment can be made when tax due
• Competitors


  To make performance comparisons and strengthen weak areas
• Local Community


  Will be concerned about the impact of the business on the local environment and also whether the business will provide employment opportunities