What is accounting ?
Language of business
Provides as systematic process for recording, summarising,analysing and reposting financial transactions
Financial accounting
Reports fiancncial performance to external shareholders
Historical data
Management accounting
Insights to internal decision making
Uses data to plan and forecast future activities
Bookkeeping
Recording data related to accounting transactions in the accounting books
Accounting
Process of identifying , communications and measuring economic information to permit informed judgement and decisions by users
Accounting standards
To achieve comparability between different organisations
International finanacial reporting standards
Globally accepted accounting standards
3 types of business entity
Sole trader
Partnerships
Limited liability company
Debit
Receiving element of transaction
Expenses
Assets
Drawings
Credit
Providing end of transaction
Liabilities
Income
Capital
Accounting standards
Attempts to deal with some subjectivity and achieve comparability between different organisations
Accrual accounting
Effects of transactions and other events are recognised when they occur
And recorded in accounting records and reported in financial statements
Money measurement principle
Requires the business accounting system only includes items that can be measurable in financial terms
(Transactions, value ,limitations)
Transactions
Value of transactions in financial value
Value
Is recorded and agreed by both parties to the transaction
Limitation
Omit important business values that are non financial e.g people
Entity principle of accounting
Requires the business is treated entirely separate from its owners
Entity principle of accounting means that
Transactions : will be between business and 3 rd parties
Profit : goods are sold for more than the selling price
Owners personal personal use:Where cash/ goods are taken from business for private use of the owners
