Phuong - Principles of Accounting - An introduction

• 1. Principles of AccountingAccounting An Introduction Nguyen Hoang My Phuong [email protected]

2. What is accounting?Difference between a bookkeeper and an accountantWhat is the purpose of bookkeeping and accounting?Who are the users of accounting information? MainThe conflicting interests of userscontentBranches of AccountingAccounting and FinanceAccounting as an information systemWhy do I need to know anything about accounting and finance? 3. What is accounting? 4. From the outside, accounting can appear to be apurely practical subject. It would be very easy tofocus on just the application of techniques andprocedures. BUT accounting is more than just a setof calculations; unless we can understand andinterpret the figures we produce, the calculationsare pointless! 5. What is accounting?Accounting is termed as the analysis, classification andrecording of financial transactions,and theascertainment of how such transactions affect theperformance and financial position of a business.Accounting there for concerned with: recording of data classification and summary of data communicating what has been learned from the data 6. Difference betweena bookkeeper and an accountant 7. Difference betweena bookkeeper and an accountantBookkeeper AccountantRecording the detailed financialClassifying and summarizingactivities of a business. business transactions andinterpreting their effects.The bookkeepings end product, asfollowing certain procedures,becomes the raw material for theproduction of the final statements ofthe business.Concerned with techniques Concerned with the use of data forinvolving the recording transactions. interpretation. 8. What is the purpose of bookkeeping andaccounting? To provide information concerning the financialaffairs of a business. 9. Who are the users of accounting information? Internal users Owners Employees External users Bank and other financial institutions Potential investors/Prospective buyers The government Customers and suppliers The local community Business competitors Economic analysts Members of general public Future partners 10. Who are the users of accounting information? - Example Activity 1.1, page 4Eddie McLaney and Peter Atrill (2008), Accounting An Introduction, 4th edition, Pearson Education Limited. 11. The conflicting interests of usersConflict between user groups is most likely to occurover the way in which the wealth of the business isgenerated and/or distributed.For example, conflict between the managers andthe owners of a business, or lenders and owners. 12. Branches of Accounting Cost and management accounting Financial accounting Auditing 13. Branches of AccountingFinancial accountingManagement FinancialExternal users Internal usersPrepared on a periodic basis (most Prepared frequently, as and when it iscompanies publish their financial statements needed (most large businesses will prepareonly once a year, in their annual report)some information on a monthly basis and many use daily accounting information)Based on past events and historic data More likely to contain forward-looking information (such as forecasts and budgets)Comprised solely of financial informationMore likely to incorporate non-financial information (such as quantities of products sold or numbers of customer complaints)Governed by rules and regulation Not regulated (managers are free to produce whatever information they need in whatever format is most helpful to them, subject to available data and technology) 14. Branches of AccountingAuditing: determines whether recorded informationis true reflection of the business transactions thattook place during an accounting period.Auditing is done in 2 ways internal or external,or both. 15. Accounting & FinanceFinance, like accounting, exists to help decisionmarkers. It is concerned with the ways in whichfunds for a business are raised and invested.In essence, a business exists to raise fund frominvestors (owners and lenders) and then to usethose funds to make investments (equipment,premises, inventories and so on) in an attempt tomake the business, and its owners, wealthier. 16. Accounting as an information systempage 11Eddie McLaney and Peter Atrill (2008), Accounting An Introduction, 4th edition, Pearson Education Limited. 17. Countries around the world organize their economicand financial activities in different ways so, inevitably,legal requirements, regulation and administrativeprocedures also vary across countries.However, accounting rules and guidelines around theworld are becoming more similar (converging). 18. Why do I need to know anything about accounting and finance? 19. What is accounting?Difference between a bookkeeper and an accountantWhat is the purpose of bookkeeping and accounting?Who are the users of accounting information? MainThe conflicting interests of userscontentBranches of AccountingAccounting and FinanceAccounting as an information systemWhy do I need to know anything about accounting and finance? 20. Reference Joel J. Lerner, M.S., Ph.D. (2004), Bookkeepingand Accounting, The McGraw-Hill. Jennifer Ireland (2005), Principles of accounting,London School of Economics and PoliticalScience (LSE) Eddie McLaney and Peter Atrill (2008),Accounting An Introduction, 4th edition, PearsonEducation Limited. Cambridge University Press, Unit 1 BasicPrinciples of Accounting. 21. Q&[email protected]