Accounting

• Accounting


  A systematic process of recording, reporting, analyzing and interpreting financial transactions of a business
• Book Keeping


  Aims to just record and organise financial data like billing, payroll and invoicing
• Purposes of Accounting


  • To Record all info regarding the business trade receivable and the amounts owed to the business
  • To Record all info regarding the business trade payables and the amounts the business owes them
  • To Help the manager in decision making, especially in the planning of cash flow and maintaining control over assets
  • To Ascertain the financial position by determining whether the business made a profit or suffered a loss
• Trade Receivables/Debtors


  People who owe the business money
• Trade Payables/Creditors


  Persons the business needs to pay
• Internal Users of Accounting Info

  • Investors
  • Board of Directors
  • Managers
• External Users of Accounting Info

  • Financial Planners
  • Financial Press
  • Potential Investors
• Accountants organise and maintain financial records, prepare tax returns and suggest ways to increase revenue, etc.
• Fields of Accounting


  • Private Accounting
  • Public Accounting
  • Government & Not-For-Profit Accounting
  • Higher Education
• Private Accounting Jobs


  May specialise in budgeting, preparing detailed reports, controlling assets and internal auditing
• Public Accounting Jobs


  May specialise in preparing company's financial statements, examining financial records and reviewing financial statements
• Accounting Careers


  • Educators
  • Consultants
  • Financial Services
• Internal Auditors


  Activities span the entire year
• External Auditors


  Carried out after year end
• Internal Auditors


  Report to management
• External Auditors


  Report to shareholders/regulators
• Internal Auditors


  Company employees
• External Auditors


  Hired by organisations
• Ethics


  The morals governing human behaviour
• Professional Ethics


  A code that is correct for a specific group or profession
• Code of Ethics


  • Objectivity
  • Professional Competence and Due Care
  • Integrity
  • Professional Behaviour
  • Confidentiality
• Factors that influence ethical views include law, culture, code of ethics or consequences
• If the principles and procedures are not adhered to, the business will experience major problems in the area of fraud, tax evasion, false financial records, etc.
• The results include jail, lawsuits, job loss and fines
• If the auditor is able to identify these illegal activities and does not attend to them, they will grow into situations that can be embarrassing and costly to legal entities
• Accounting Cycle Stages


  • Collecting source documents that provide details for financial records
  • Listing key details in books of original entry
  • Posting the information in books of original entry into ledger accounts
  • Checking & controlling systems to ensure accuracy
  • Summarising financial information at least annually in the form of income statements, balance sheet, etc.
• Accounting Principles


  • Historical Cost Principle
  • Objectivity Principle
  • Going Concern
  • Matching (Accrual) Principle
  • Accounting Entity Concept
  • Prudence (Conservatism) Concept
  • Accounting Period Concept
  • Consistency Concept
  • Monetary Measurements Concept
  • Materiality Principle
  • Realisation
  • Substance over form
• Accounting Equation / Balance Sheet Equation

  Assets=Capital + Liabilities
• Balance Sheet Information


  • Assets
  • Liabilities
  • Capital/Equity
• —ACCOUNTING PRINCIPLES

  These are the guidelines used by accountants when preparing financial info as objective as possible

   

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•      Historical Cost Principle: The original cost of Non current assets at the time of purchase are used.
•     Objectivity Principle: Accounting records should have supporting documentary evidence like invoices or receipts which will give objectivity value of the transactions. ·      
• Going Concern: The business lifespan should be preferably indefinite. The business must be started with the sole intention of making profit. ·      
• Matching (Accrual) Principle: Revenues earned and expenses incurred during the same period are compared to calculate profit or loss.

  Revenues– Expenses= Net Profit.
• Accounting Entity Concept: The business entity is separated from the owner’s personal matter and should always be treated as separate entities. ·      
• Prudence (Conservatism) Concept: Always choose the alternative that gives a lower profit and assert value. The business should choose a method of valuing assets and profits. An asset value is taken as its net realisable value (the value it would fetch if sold in the market) or a valuation amount, which is lower. This ensures that asset values are not over inflated. ·      
• Accounting Period Concept: Accounting period if the lifespan of the business that can be divided into monthly, quarterly or yearly periods. ·      
• Consistency Concept: Once an accounting method is used, it should remain unchanged for the future accounting periods, to ensure that financial records are consistent. ·      
• Monetary Measurements Concept: Only transactions that can be expressed in monetary units are recorded. ·      
• Materiality Principle: If items are small in value, they do not need separate recording. ·