Accounting 2023 ADVANCED LEVEL

Accounting

2023 ADVANCED LEVEL

ENGLISH MEDIUM

TUTE - 01

Analyses of Accounting and its need.

Official Accounting Lecturer for Dialog Revision TV Former Visiting Lecturer for Visakha Vidyalaya Colombo

Pasindu Wijerama Bsc( Mgt) Sp – University of Sri Jayewardenepura Master of Business Administration University of Colombo, AMBCS UK,

MAAT, LICA, CA Strategic 11

0773 00 25 51

Accounting and its needs

Introduction Objective

Stakeholders

Types of Accounting

Financial Accounting

Process

Differences

Process

Management Accounting

Reasons for their interest

nalyses of Accounting and its need.

Concept Map

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Analyses of Accounting and its need- PASINDU WIJERAMA -

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Explains what is Accounting.Explains the objective of AccountingNames the stakeholders of a businessAnalyses information required by the stakeholders in on organizationon a grid.

Subject content

Introduction to Accounting

American Accountancy Association (AAA)

“Accounting is the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by the users of the information”.

American Institute of Certified Public Accountants (AICPA)

“Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in part at least, of a financial character, and interpreting the results thereof”.

Accounting is a process which provides the financial information to the stake holders of the entity to take their decision

Common Definition for Accounting

“Accounting is the process of providing relevant economic information to the concerned stakeholders to enable them to make appropriate decisions.”

By considering the above definitions following can be considered as common features in accounting.(1) Accounting is a process(2) It provides the economic information to the stake holders.(3) It enable them to make appropriate decision.

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Define Accounting?

Question 01


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What is the Main Objective of Accounting?

Other Objectives in Accounting1. Helps to control business resources2. Helps for the taxation purpose3. Helps to reduce fraud and errors4. Helps to provide information for National accounting5. To enlighten with the legal regulations

The primary objective of accounting is to,

(1) Record all transactions in the books of accounts

(2) Record categorize and summarize financial transactions

(3) Provide information to users for decision making

(4) Provide financial results of an organization through financial statements.

(5) Provide with detailed analysis of costs to managers. (.........)

2006 ADVANCED LEVEL

Question 02

Objectives of Accounting

Main objective of accounting is the communicating of economic information, about the entity that will enable

interested stake holders to take decisions based on such information.

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Which of the following statements best describes the function of accounting in a firm?

(1) It measures transactions and events of the firm on monetory bisis.

(2) It analyses financial information of the firm for the use of its managers.

(3) It records the transactions and events of the firm in the books of accounts

(4) It provides information about the firm for decision making by its stakeholders

(5) It provides information about utillzation of resorces of the firm to its managers (.........)

2014 ADVANCED LEVEL

2012 ADVANCED LEVEL (1)

The primary objective of accounting is,

(1) to record all transactions of an entity in the books of accounts.

(2) to record, categorize and summarize transactions of an entity

(3) to analyze the information presented in financial statements of an entity

(4) to provide a detailed analysis of transactions of an entity to its managers.

(5) to provide information about an entity to its users decision making. (.........)


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2013 ADVANCED LEVEL (1)

Which of the following statements best describes the role of financial accounting in a firm?

(1) It records transactions of a firm in the books of accounts.

(2) It converts transactions of a firm into financial information.

(3) It prepares financial statements of a firm for its annual audit

(4) It provides information of a firm to its external stakeholders and managers for decision making?

(5) It provides information to managers for planning & control of a firm (.........)


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2016 ADVANCED LEVEL

Which of the following statements best describes the main purpose of accounting in a firm?

(1) To record transaction of the firm in the prime entry books.

(2) To record transaction of the firm to prepare financial reports.

(3) To prepare financial reports of the firm based on accounting stand is.

(4) To communicate information about the firm for the use of managers.

(5) To communicate information for decision making by stakeholders of the firm (.........)

2017 ADVANCED LEVEL

What is the main purpose of financial accounting in a firm?

(1) To provide information to managers to take decisions.

(2) To provide information to government to charge taxes on the income.

(3) To provide information to auditors to express an opinion on financial statements.

(4) To provide information to monitor compliance of financial statements with accounting standards.

(5) To provide information to external stakeholders to take decisions. (.........)

Users (Stake Holders) and Their Information Needs

The users of financial statements includes owners management, employees lenders, suppliers and other trade

creditors, customers, the Government and its agencies and the Public. They use financial statements in order to

satisfy some of their different needs for information

Question 03

Name four stake holders of a business.

(1) .................................................................................................................................................................

(2) .................................................................................................................................................................

(3) .................................................................................................................................................................

(4) .................................................................................................................................................................

(1) Owners

The providers of risk capital and their advisers are concerned with the risk inherent in, and return provided by,

their investments. They need information to help them determine whether they should buy, hold or sell.

Shareholders are also interested in information which enables them to assess the ability of the entity to pay

dividends.

Question 04

Define Stake Holders ?

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(2) Managements

Managements includes group of peoples who take the managerial decisions in a business. In a sale proprietorship

or partnership owners are doing the management. But in companies not the owners but the separate board

(Board of Directors) perform the management function.

(3) Creditors & Lending Institutions

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What is the difference between lenders and the creditors?

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CreditorLenders

(4) Employees

Employees and their representative groups are interested in information about the stability and profitability of

their employers. They are also interested in information which enables them to assess the ability of the entity to

provide remuneration, retirement benefits and employment opportunities.


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(5) The Government and its agencies

The Government and its agencies are interested in the allocation of resources and, therefore, the activities of

entities. They also require information in order to regulate the activities of entities, determine taxation policies

and as the basis for national income and similar statistics.

(6) Customers

Customers have an interest in information about the continuance of an entity, especially when they have a long-

term involvement with, or are dependent on, the entity.

The information requirements of the stakeholders.Interested stake holders

Owner / owners Has a satisfactory profit been made in accordance with the investment?

should further investments be made?·

(1) ·

Management Are plans being implemented appropriately?

What are the necessary plans/ decisions for future development?·

(2) ·

Employees Is there stability of employment?

Is the business able to increase wages / salaries?·

(3) ·

Government institution

E.G :- Tax department

Are taxes being received on the due dates?

Are relevant reports submitted to appropriate entities?

Are quality goods available at a reasonable price?

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(4) ·

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Customers Are goods of good quality provided at reasonable prices?

Does the organization have a reputation and ability to honour their

commitments?

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(5) ·

Creditors and lending

Institutions

Can the monies lent be recovered?

Is it feasible to extend further credit / loans?·

(6) ·

Identify Main decisions Taken by the Following Stake Holders

1.

Main Decision

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2. Management

Main Decision

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3. Employees

Main Decision

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Owner / owners


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4. Government institution E.G :- Tax department

Main Decision

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5. Customers

Main Decision

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6. Creditors and lending Institutions

Main Decision

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Classification of stake Holders of a Business

Stake holders in a business can be classified as follows.

1. Internal Stakeholders.

2. External Stakeholders.

Internal Stakeholders

Those are the personal that have the authority to take operational and financial decision of a business. Normally

only board of Directors will be treated as internal stakeholders. Therefore any stake holders, other than

management are external stake holder.

Who will be considered as the internal stake holder of a business.

(1) owner / owners (2) Employees (3) Management

(4) Competitors (5) Lenders (................)

Question 05

Accounting 2023 ADVANCED LEVEL

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