Introduction to Accounting

What Is Accounting? Accounting has been defined as the art of recording, classifying and summarising 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. From the above definition, it can be observed that Accounting comprises of basically five main activities.

Introduction to Accounting
From the above definition, it can be observed that Accounting comprises of basically five main activities. Recording Classifying Summarising Communication Interpretation Reporting

Introduction to Accounting
Purposes The main purpose of Accounting is to provide financial information about an economic entity. It provides a means where the steward reports to the owner how the funds entrusted to him are used to enhance the wealth of the business.

Introduction to Accounting

Business Transaction A business transaction is an event which involves the transfer of money or moneys worth of financial events. The following summarises the business transaction that a firm might have: Acquisition of assets from owners and other creditors Investing resources in assets to produce goods or services Using resources to produce goods and services Selling goods or services of the firm Paying those to whom money is owned Returning assets to owners

Introduction to Accounting
Difference Between Book-Keeping and Accounting

Book-keeping means the recording of transactions of a business in methodical manner so that information relating to them may be quickly obtained. It intends to be mechanical and repetitive. Accounting includes the design of accounting system, preparation of financial statements, development of budgets, cost studies, audits, income tax work, computer applications to accounting processes and the analysis and interpretation of accounting information as an aid to making business decision.

Introduction Accounting
Users of Accounting Information Owners Managers Loan Creditors Prospective Investors Employees/Labour Unions Governments General Public

Introduction to Accounting
Accounting Equation

Assets = Capital + Liabilities