acca_ch1(F3)

Outline for Chapter 1
1. What is accounting?
1.1 Type of information 1.2 Accounting process 1.3 Financial statements 1.4 Users and uses of accounting information
1. WHAT IS ACCOUNTING?
Accounting is an information system that identifies, records, and communicates the economic events (transactions) of an organization to interested users.
2 Branches of accounting 3 Mechanism to Assure the Usefulness of Financial Accounting Information 4 Types of business entities
1.1 Types of Information
Information Nonquantitative Information Quantitative Information Nonaccounting Information
1.2 THE ACCOUNTING PROCESS
Communication Identification Recording
Accounting Reports
Prepare accounting reports Select economic events (transactions) Record, classify and summarize
SOFTBYTE
Annual Report
Accounting Information
Analyze and interpret for users
1.3 Financial Statements
• The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decision.
BASIC FINANCIAL STATEMENTS
Statement of Cash Flows
Balance Sheet
Income Statement
Statement of Stockholders’ Equity
1


1.4 USERS & USES OF ACCOUNTING INFORMATION
2. Branches of Accounting
• Management accounting: Provide information to aid managers solely. • Financial accounting: Provide information intended for both internal and external users. • Auditing
Internal Users
Marketing managers Production supervisors Finance directors Company officers
Investors/shareholders Creditors Trade contacts Tax authorities Regulatory agencies Employees Financial analysts &advisers Others
External Users
3. Mechanism to Assure the Usefulness of Financial Accounting Information
Auditing Standards Accounting Standards (GAAP)
(Generally Accepted Accounting Principles) What is GAAP? A set of standards generally accepted and universally practiced by accountants 1. Indicates how economic events are reported 2. Generated by the International Accounting Standards Board (IASB) and National standard setters 3. Including stock exchange requirements
True and fair view
GAAP
Follow
Observe
Audit Reports Audit Financial report Statements By By auditors accountants
Users
IASB and It’s Pronouncements
• • International Accounting Standards Board () IASB’ Pronouncement (/standard/standard.htm)
– IASB Framework – Accounting standards
• • • • IAS (31) IFRS (8) SIC Interpretations (11) IFRIC Interpretations (13)
A business owned by one person is generally a sole trader. A business owned by two or more persons associated as partners is a partnership. A business organized as a separate legal entity under state corporation law and having ownership divided into transferable shares of stock is a corporation.
4. TYPES OF BUSINESS ENTERPRISES
– IFRIC Interpretations
2

















。