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General View of Accounting

CHAPTER 1. General View of Accounting. Introduction of accounting. * Second oldest profession. * Participated in the development of nations, trade, finance, money and banking. * Double-entry bookkeeping fueled the Renaissance. Introduction of accounting.

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General View of Accounting

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  1. CHAPTER 1 General View of Accounting

  2. Introduction of accounting * Second oldest profession * Participated in the development of nations, trade, finance, money and banking *Double-entry bookkeeping fueled the Renaissance

  3. Introduction of accounting treatise on book-keeping Luca Pacioli (1445-1517) Summa di Arithmetica People have understood accounting on a scientific principle in Italy

  4. Introduction of accounting The first known English book on accounting John Gouge, 1543 A Profitable Treatyce called the Instrument or Boke to learn to know the good order of the kepying of the famouse reconynge, called in Latyn, Dare and Habdare, and, in Englysh Debitor and Creditor.

  5. Introduction of accounting In 1831 A Bankruptcy Act It mentions accountants alongside merchants and bankers as properly skilled to conduct audits. The first public recognition of accountants

  6. Introduction of accounting Management accounting World War One (1914-1918) Accountants assist in the control of costs in relation to the production of ammunitions: bullets, bombs, explosives, etc.

  7. Introduction of accounting After the Second World War Development of accounting Enronfinancial scandal In August 2002, the Sarbanes-Oxley Act is passed in the United States.

  8. Accounting Definition It is the means of recording transactions and keeping records. ≠ Accounting Bookkeeping Bookkeeping is the day-to-day record-keeping involved in the process of accounting. Accounting Bookkeeping

  9. Accounting Definition Accounting Accurate financial reports Useful to managers, regulators, and shareholders, creditors or owners

  10. Accounting Definition Analysis Major goal of accounting Interpretation Use of information

  11. Accounting Definition The American Institute of Certified Public Accountants (AICPA) “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.” Early definitions of accounting focused on the traditional record-keeping functions of the accountant.

  12. Accounting Definition The modern definition of accounting It is defined as an information system that measures, processes, and communicates financial information about an identifiable economic entity. Encyclopedia Accounting is defined as the process of maintaining, auditing, and processing financial information for business purposes.

  13. Accounting Definition The modern accountant record-keeping Planning and problem solving Control and attention directing Evaluation Review Auditing

  14. Accounting Definition Accounting Data Business activities Useful information Decision maker

  15. The Users of Accounting Information Users • those who have a direct interest in the • business including management; 2. those who have indirect interest in the business.

  16. Users with Direct Financial Interest Management Present and Potential Investors Present and Potential Creditors

  17. Management Management Management is the group in a business who has overall responsibility for operating the business and for achieving the business goals. Owners of the business Hired managers

  18. Management Major function of accounting To provide management with relevant and useful information Such as: what was the company’s net income during the past year? What products are most profitable? What is the cost of manufacturing each product?

  19. Present and Potential Investors They are interested in the past success of the business and its potential earnings in the future. Operating results of business Make decisions Profit sharing policy Whether to increase, or decrease investments

  20. Present and Potential Creditors Individuals Suppliers Banks Finance companies Insurance firms Securities firms Mortgage companies They are interested in whether the company will have the cash to pay the interest and repay the debt at fixed time.

  21. Users with Indirect Financial Interest Tax Authorities Other Groups

  22. Tax Authorities Each tax requires special tax returns and often a complex set of records as well. Governments Income taxes Social security Payroll taxes Excised taxes Sales taxes Tax authorities don’t have direct financial interest in the company, but they usually analyze the tax status undertaken by a business to establish tax policy.

  23. Other Groups Financial analysts and advisers brokers lawyers economists the financial press They advise investors and creditors and have an Indirect interest in the financial performance of a business.

  24. Other Group Other Groups Customers The general public They are concerned about the operating results, the effects that corporations have on inflation, the environment, social problems, and the quality of life.

  25. Accounting Profession Public Accounting Management Accounting Government Accounting Internal Auditing

  26. Public Accountants Certified Public Accountants

  27. The Work of Public Accountants Work for their own compay Work for other accouting companies provide accounting services to individuals, businesses, and governments Concentrate on tax matters Specialize in forensic accounting

  28. Government Accountants work for the local or state level

  29. The Work of Government Accountants • Keep and examine the records of government units • administer and formulate budgets, to track costs and to analyze programs • They must follow special procedures and regulations and reports for government officials

  30. Management Accountants work in companies and help the Management make decisions

  31. Work of Management Accoutants • Provide the management advice about capital budgeting and business analysis • Record and analyze the financial accounting information, market share, competition, and expansion opportunities of the company

  32. Internal Auditors check accounting ledgers and financial statements within companies

  33. Work of Internal Auditors • Take training to keep skills up to date. • Create and develop auditing systems for companies or agencies. • Conduct research to learn auditing needs for companies or individuals. • Determine and record the value of real property. • Analyze the financial data and records to ensure that they comply with legal and financial standards.

  34. WE ARE SAILING RIGHT ALONG!!

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