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INTRODUCTION TO ACCOUNTING - Coggle Diagram
INTRODUCTION TO ACCOUNTING
DEFINITION
Process of designing & operating an information system for
collecting, measuring, recording an enterprise's transaction
summarizing & communicating the results
Provide information about business organizations to interested parties
OBJECTIVES
Gather acc info with respect to financial performance & financial position of a business for the purpose of preparing financial statements
Assist a wide range of users of the financial statements to analyze, evaluate & assess the stewardship of the business's management & for making economic decisions.
USERS OF ACC INFO
Suppliers & other trade creditors
Assess ability to settle the amount owed when due
Over short period/ long term if the enterprise is likely to be their permanent customer
Customers
Assess the ability of the enterprise to continue providing products or services
Leaders
Assess the ability to settle amount owed to them when due. Eg : loans & interest
Government & their agencies
Information about allocation of resources
Information to enable them
to regulate the business activities
determine taxation polices & basis
Employees
Assess the stability & profitability of their employers
Ability to provide salary & other benefits
Employment opportunities
Public
Asses contribution to local economy
Trends & recent developments in the prosperity of the enterprise & the range of activities
Social responsibility
Investors
Concerned about risk & return of their investment
To determine whether to
buy
hold
sell
TYPES OF BUSINESS INFORMATION
PROFIT ORGANIZATIONS
Must decide up front how much time and capital each will contribute
Partners should have a legal agreement
Profits will be shared
Disputes will be resolved
How future partners will be admitted to the partnership
How partners can be bought out
How decisions will be made
What steps will be taken to dissolve the partnership when needed
2/more people share ownership of a single business.
Large funds through the issue of shares and debentures
Limited liability, perpetual existence and shares to be traded on the stock exchange (Bursa Malaysia).
A legal entity
can sue
has its own bank account
be sued
enter into a contracts
has property in its own name
employ people
The owners of a corporation are its shareholders
A separate legal entity.
The shareholders liability is only limited to the capital amount invested in the company.
Owner is financially and legally responsible for all debts and legal actions against the business
Taxes on a sole proprietorship are determined at the personal income tax rate of the owner
Small organization, the owner is inseparable from the business (same entity)
NON PROFIT ORGANIZATIONS
Co-operatives
Societies
STAGES OF ACC DEVELOPMENT
STAGE 1 The Beginning of Record Keeping
Ancient Greece
Manorial England
Ancient Babylonia (2286 – 2242 BC)
STAGE 2 The Development of Double Entry Accounting
Commerce in Old Italy
Luca Pacioli: The Father of Accounting
STAGE 3 Advent of Corporation and the Standardisation of Accounting
ROLES OF ACC IN BUSINESS
To help stakeholders make better business decisions by providing them with financial information
The income statement provides information about the profit and loss
Provides much of the information that owners, managers, and investors need to evaluate a company’s financial performance.
The balance sheet gives a clear picture on the financial position of the business on a particular date.
To provide financial information to the stakeholders of the business
investors
creditors
management
The cash flow statement is a bridge between the income statement and balance sheet and reports the cash generated and spent during a specific period of time.
