Lecture 1
Principles of Accounting - 1
Preliminary Introduction
PRELIMINARY INTRODUCTION
General Business Environment; Local & International
Types of ownership
Concept & Characteristics of Business Transactions
Nature or Kinds of Businesses
Definition & Purpose of Accounting
Types of Accounting
Financial Reporting Process
Overview of IFRS
Financial Statements
Users of Financial Statements
Annual Reports of Listed Company
Forms of Business Organizations
Business
Organizations
Sole
Partnership Corporations
Proprietorship
Nature or Kind of Businesses
• Merchandising/trading
• Manufacturing
• Services
Users of Internal Accounting
Information
Board of directors
Chief executive officer (CEO)
Chief financial officer (CFO)
Vice presidents
Business unit managers
Plant managers
Store managers
Line supervisors
External Users of Accounting
Information
•Owners
•Creditors
•Labor unions
•Governmental agencies
•Suppliers
•Customers
•Trade associations
•General public
Users of Accounting Information
• Internal Users • External Users
• Board of directors • Owners
• Chief Executive Officer (CEO) • Creditors
• Chief Financial Officer (CFO) • Labor unions
• Vice Presidents • Governmental agencies
• Business Unit Managers • Suppliers
• Plant managers • Customers
• Store managers • Trade associations
• Line supervisors • General public
Accounting Process
Accounting as an Information System
Concept and Characteristics of Business
Transactions
• Accounting is based on actual transactions, not
opinions or desires.
• A transaction is any event that affects the financial
position of the business and can be measured
reliably.
• Transactions affect what the company owns, owes,
or its net worth.
• Many events affect a company, including economic
booms and recessions. Accountants, however, do not
record the effects of those events.
• An accountant records only those events that have
dollar amounts that can be measured reliably, such
as the purchase of a building, a sale of merchandise,
and the payment of rent.
Types of Business Transactions
1. Investment by owners (stockholders)
2. Purchase of an Asset for Cash
3. Purchase of an Asset on Account
4. Purchase of an Asset and Financing Part of the
cost.
5. Sale of an Asset
6. Collection of Account Receivable
7. Payment of a liability
8. Earning of Revenue
9. Payment of expenses
