Basic Financial Accounting PPT 1
Basic Financial Accounting PPT 1
Basic Financial Accounting PPT 1
Explains the functions and importance of accounting, and identify the three basic activities involving accounting.
Identify the foundations of the accounting system, including GAAP and the role of the Financial Accounting Standards Board (FASB).
Outline the steps in the accounting cycle, and define doubleentry bookkeeping and the accounting equation.
Explains the functions and major components of the four principal financial statements: the balance sheet, the income statement, the statement of owners equity, and the statement of cash flows. Discuss how financial ratios are used to analyze a companys financial strengths and weaknesses. Describes the role of budgets in a business. Outline accounting issues facing global business and the move toward one set of worldwide accounting rules.
Accounting is the process of measuring, interpreting, and communicating financial information to support internal and external business decision making (End Users )
Customers
Owners
Government
Managers
Investor
Objectives of accounting : 1) Systematic recording and measuring of the business transactions 2)Calculation of profit or loss 3) Depiction of financial position 4)To make information available to various group and users at a particular time. 5) To know the solvency position
Methods of Accounting
a) Cash Basis Accounting Method Recognizes accounting transaction at point of cash inflow or outflow b) Accrual Basis Accounting Method Recognizes all revenues earned and records all expenses incurred for the period Matches expenses with revenues Requires adjusting entries
Management accounting
Financial accounting
Cost accounting
Financial Accounting Statutory External focus GAAP Audit End products: BS, IS, CFS
Cost and Management Accounting Not statutory Internal focus Non-GAAP No audit End product: depends on the managerial requirement
ACCOUNTING CYCLE
1. Analyze transaction
3. Post journal entries to ledger 4. Identify, journalize and post adjusting entries
Accounting
1) Summarizing transactions. 2) Language of the business. 3) Decisions can be taken 4) Several sub-fields 5)Financial position can ascertained
Event
Financial Statements
Users
Accounting Equation
Assets - anything of value owned or leased by a business. Liability - claim against a firms assets by a creditor. Owners equity - all claims of the proprietor, partners, or stockholders against the assets of a firm, equal to the excess of assets over liabilities. Basic accounting equation - relationship that states that assets equal liabilities plus owners equity. Assets = Liabilities + Owners equity Double-entry bookkeeping - process by which accounting transactions are entered; each individual transaction always has an offsetting transaction
Accounting equation
Accounting Equation
ASSETS = EQUITIES
Accounting Equation
Stakeholders include groups that have direct economic links to the firm.
Stakeholders include not only owners, but also employees, customers, suppliers, and creditors. Maintaining positive stakeholder relationships helps maximize long-term benefits to shareholders.
Annual Report : Annual report - a document prepared by management and distributed to current and potential investors to inform them about the companys past performance and future prospects. The annual report is one of the most common sources of financial information used by investors and managers
The annual report usually includes: A letter from corporate management A discussion and analysis of recent economic events by management Footnotes that explain many elements of the financial statements in more detail The report of the independent auditors A statement of managements responsibility for preparation of the financial statements and other corporate information