Introduction to financial accounting notes
Transactions constitute inputs to accounting information system and it should be noted that before the effect of Transaction can be recorded however, they must be measured.Internal transactions are those economic events that take place entirely within one firm. Accountants classify these transactions into two types:Įxternal transactions: (often called exchange transactions) are those involving economic events between two or more independent firms. These are the economic activities of a business. This is the establishment of budgets, standard costs and actual costs of operations, processes, activities or products and the analysis of variances, profitability or social use of funds. This gives specific financial information to meet the demands of the management. Management Accounting involves the development and interpretation of accounting information which is intended to aid management is running the business. This gives general purpose financial information which describe financial resources, obligations and activities of an economicentity. The work is often routine and primarily clerical in nature.Īccounting system can be classified broadly intoįinancial Accounting can be defined as the analysis classification and recording of financial transactions and the ascertainment of their effect on the performance and financial position of an organisation /business/ firm / economic entry. To keep books is to record transactions, and a bookkeeper is one who records transactions either manually with pen and ink or with a book keeping machine. Book-keeping means the recording or of transactions, the record making phase of accounting.
The distinction between Accounting and book-keeping. Or Accounting has been referred to as the process of identifying, measuring and communicating economic information to permit informed judgement and decisions by the users of information.
The accounting information is financial data about business transactions expressed in monetary terms. This information is used in making economic decisions. Hence its merely concerned in making records of business transactions.Īccounting is the process or art of recording classifying and summarizing financial information and interpreting the results thereof. This is the analysis classification and recording of financial transactions in books of Account.
Accounting too, is a man-made art, one in which changes and improvements are continually being made in the process of communicating business information.ĭefinition of terms used in Financial Accounting: Since a language is a man-made means of communication, it is natural that languages should change to meet the changing needs of society. Understand the career prospects of accountantsĪccounting has often been called the “language of business” people in the business world i.e owners, managers, bankers, stockbrokers, attorneys, engineers, investors – use accounting terms and concepts to describe the events that make up the day-to-day existence of every business, large or small.Know and understand the underlying accounting principles.Know the users and purpose of accounting information.At the end of the lesson you should be able to:. This lesson introduces you to Accounting showing clearly the broad accounting systems and the underlying accounting principles. 1.5.3 Effect of business transactions upon the accounting equation.1.5.2 Effect of business transactions upon the Balance Sheet.1.3 The Fundamental Accounting Concepts, Principles And Assumption (GAAP).