...Accounting is the entire process of recording and summarizing the business transactions, reporting accounting information, analyzing and interpreting accounting reports to help those interested parties such as managers, investors, bankers and creditors to make important business decisions. The final product of accounting is a set of financial statements comprising at least Balance Sheet and Profit & Loss Statement. These statements are useful to different users for different reasons. Accounting may be divided into financial accounting and management accounting. Financial accounting is the field of accounting that provides financial information for potential investors, creditors and other external users. Management accounting provides financial information for managers and other internal users. There are different kinds of users of financial statements. The users of financial statements may be from inside or outside of the business. They use financial statements for a large variety of business purposes and their ability to understand and analyse financial statements helps them to succeed in the business world. The various users of financial statements are classified and detailed as internal users and external users. Those who lack direct access to the financial information generated by the internal operations of a business are considered as external users. They rely on the financial accounting reports that management has prepared according to financial accounting...
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...Insurance Contracts This project deals with the accounting for insurance contracts. As stated on the site, “accounting for insurance contracts does not provide users with the information they need to meaningfully understand the insurer’s financial position, performance and risk exposure.” Additionally, IFRS does not provide the proper guidance to how insurers should handle certain issues. The main goal of the Insurance Contracts project is to provide a single principle-based standard to account for all types of insurance contracts. Also, because comparability between entities is largely lacking today, the Insurance Contracts project also aims to enhance the comparability of financial reporting between them. The Insurance project is broken down into 2 phases. The first phase coincides with the issuance of ‘IFRS 4 Insurance Contracts,’ which “offered limited improvement in account by insurers and enhanced disclosures on amount, timing and uncertainty of future cash flows from insurance contracts.” Phase 2 will be the issuance of a new Insurance Contracts Standard, which will actually replace IFRS 4 (Insurance Contracts). Leases The Leases project deals with the reporting of lease information to investors and analysts. The main goal of the project is to develop a new standard that will establish the guidance for entities to follow on reporting information regarding the amount, timing and uncertainty of cash flows arising from a lease. As stated in the work plan, in...
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...Accounting Concepts, Assumptions, Principles, Elements Key Things to Know Objectives of Financial Reporting: 1. Provide useful information to investors and creditors for decision making (assume users have a “reasonable understanding” of business). 2. Provide information to access the amounts, timing, and uncertainty of cash inflows and outflows. 3. Provide information about resources (assets) and claims to resources (liabilities). Recognition: An item should be recognized in the financial statements when it meets all 4 of the following criteria: 1. Definition: meets the definition of an element 2. Measurability: measurable with sufficient reliability 3. Relevance: makes a difference in the decision 4. Reliability – representationally faithful, verifiable, neutral Accounting Underlying Assumptions - Basis for Generally Accepted Accounting Principles (GAAP) Entity Assumption - each business is its own “accounting” entity. Periodicity Assumption - divide economic activities into time periods for reporting. Going Concern Assumption - the company will remain in business and will...
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...Advanced Accounting Information Systems 1 INTRODUCTION • We’ll also discuss how to hasten or improve the development process through: – Business process reengineering – Prototyping – Computer-aided software engineering (CASE) tools © 2012 UMT Advanced Accounting Information Systems 2 BUSINESS PROCESS REENGINEERING • Business process reengineering (BPR) is the analysis and redesign of business processes and information systems to achieve significant performance improvements. – Reduces a company to its essential business processes. – Reshapes organizational work practices and information flows to take advantage of technological advancements. © 2012 UMT Advanced Accounting Information Systems 3 BUSINESS PROCESS REENGINEERING • BPR: – Simplifies the system. – Makes it more effective. – Improves a company’s quality and service. • BPR software has been developed to help automate many BPR tasks. © 2012 UMT Advanced Accounting Information Systems 4 BUSINESS PROCESS REENGINEERING • Michael Hammer has set forth several principles that help organizations successfully reengineer business processes: - Organize around outcomes, not tasks. • DO AWAY WITH: Assigning different parts of a business process to different people, with the resulting handoffs, delays, and errors. INSTEAD: Each person’s job is designed around an objective, outcome, or process rather than a task needed to complete a process. • © 2012 UMT Advanced Accounting Information...
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...Leslie Johnson January 31, 2010 ACC/280 Principles of Accounting Accounting is a systematic proocess that identifies, records, and communicates the economic events of an organization to interested users (Weygandt, 2008). The financial information gathered is used to determine a company’s financial status and provide reports and insights needed to make sound financial decisions. The purpose of accounting is to provide economic financial information for investor, creditors, and other external users. Accounting identifies and records all activities that effect the organization financially. Accounting is a means of communicating the numbers. The three basic activities in accounting identify, records, and communicate the economic events of an organization to interested users (Weygandt, 2008). One example of an economic event is telephone service is provided by Verizon. Once the company has identified the economic event, it is recorded in order to provide a history of the organizations financial activities. The accounting process includes the bookkeeping function that usually involves only the recording of economic events (Weygandt, 2008). Collectively, accounting involves the entire process of recording, identifying, and communicating economic events. Management uses accounting information in planning, controlling, and evaluating business operations. Other groups that use accounting information are tax authorities, regulatory agencies, customers, labor unions...
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...Brief introduction of financial accounting This essay will just briefly make an introduction to financial accounting by answering four questions. Firstly the paper will discuss the objective of financial accounting, and then will make explanation on relevant information. Also the users of financial accounting will be mentioned in the third part, then after the reason why financial market needs accounting reports, we will get to the conclusion. What is the major objective of financial accounting? “Financial accounting may be defined as the process of designing and operating an information system for collecting, measuring and recording an enterprise’s transactions, and summarizing and communicating the results of these transactions to users to facilitate making financial economic decisions”(Andrew Thomas, 2005) The first part of this explanation involves in collecting and recording business transactions. And it is specifically called the double entry bookkeeping. One of the objectives is to record and control as well as classifies those financial transactions, and normally, this process is done by a computer in modern society. Secondly the objective is about preparing and summarizing relevant information to financial statements income statements trail balances and many other financial statements. These statements can be significantly helpful for the information users. (Andrew Thomas 2005) According to Andrew Thomas (2005) the above two function can be further separate into...
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...MEANING OF ACCOUNTING: Accounting is famously known as the "language of business". Through the financial statements, the end-product reports in accounting, it delivers information to different users. Accounting is a means through which information about a business entity is communicated. Accounting Definition: Technical definitions of accounting have been published by different accounting bodies. The American Institute of Certified Public Accountants (AICPA) defines accounting as: "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 financial character, and interpreting the results thereof." To further understand what accounting is, we must take a look at the different definitions. Accounting as a Science: Accounting is the process of identifying, measuring, and communicating economic information to permit informed judgment and decisions by users of information. Accounting as an Art: Accounting is the art of recording (journalizing), classifying (posting to the ledger), 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 to interested users. Accounting as an Information System: Accounting is a service activity, which functions to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful...
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...THE CONCEPTS OF ACCOUNTING AND QUALITIES OF ACCOUNTING INFORMATION A) Accounting is the process of identifying, recording, classifying, summarizing and evaluating information’s that can be measured in monetary terms for accurate communication of these economic events through proper presentation and interpretation for users of the information to make a favorable decision. However for accounting to achieve its objective, than the carried information should have certain qualities and six of them are explained with example below; 1. Accounting information must be relevant. The information must be essential to users to predict future possible outcomes. Relevant information should inform the users the financial performance of the entity to make accurate decisions. However, if the information limits users to know the financial performance of the entity to for tile future happening than the information has failed it relevant. For example if net income and its associates confirm investors predictive about future cash generation ability then the net income has feedback value for investors making it a relevant information. 2. Accounting information must be reliable. A quality business decision making is positively related to reliability of accounting information. The information can be reliable if it is verifiable and is natural. Verifiable means the information should prove be-young doubt by showing clearly income and expenses posted to the accounting general ledges for...
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...Accounting and Financial Statements Vern Rennier Upper Iowa University Accounting and Financial Statements In this essay I am going to explain and identify external users of accounting information and give detail on the main characteristics and how these characteristics and the conceptual framework develop the benefits of financial statements for external users. Financial accounting includes information distributed to external users that are not part of the enterprise, e.g. stockholders, creditors, customers and suppliers, although the information is also of interest to the company's officers and managers. External users have an interest in the businesses final accounts. They are individuals or groups from outside the business. (Cox, Fardon) They are also interested in the capability of a business to pay dividends. They may estimate the future cash flows using the past cash flow. The main external users consist of shareholders, creditors/suppliers, government, customers and lenders. (Elliot B and Elliot J) Shareholders are interested in dividends and profits. As they invest their own money in to the business they are really interested in how the business is running and how well it is doing. They are the owners of the business and they need to get information from those that manage the business on their behalf. They don’t have access to the same amount of detailed information as the managers do. The financial reports that are given to the shareholders are also...
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...Introduction to Financial Accounting Accounting works as an indicator of success (making or losing money) for a business, or a tool that is used to make decisions regarding how a company should grow. “ACCOUNTING IS THE LANGAUGE OF BUSINESS”. Definition: Accounting Information system that identifies and records the economic events of an organization and communicates to interested users. Accounting information are reported and presented in financial statements! Users of Accounting information can be divided into 2 categories: 1. Internal Users * Internal users are involved with planning, organizing and running companies. * Internal members of an organization * Example: Employees of the finance, marketing, human resources or operations departments. * Internal users are interested in knowing whether their organization has enough cash to pay upcoming bills or how much money can be allocated to the advertising activities. 2. External Users * Stakeholders outside the firm include investors, lenders, and other creditors (suppliers) * Investors will use a company’s accounting information to buy, sell, or hold onto their ownership. * Lenders, such as banks, will use accounting information to assess the risks of lending businesses money to finance operations or expansion. * Provincial Government, Labour Unions and Journalists are among other external users of accounting information. Table below is a classification of...
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...Relevance Concept: Information should be relevant to the decision making needs of the user. Information is relevant if it helps users of the financial statements in predicting future trends of the business (Predictive Value) or confirming or correcting any past predictions they have made (Confirmatory Value). Same piece of information which assists users in confirming their past predictions may also be helpful in forming future forecasts. Reliability Concept: Information is reliable if a user can depend upon it to be materially accurate and if it faithfully represents the information that it purports to present. Significant misstatements or omissions in financial statements reduce the reliability of information contained in them. Matching Concept: Matching Principle requires that expenses incurred by an organization must be charged to the income statement in the accounting period in which the revenue, to which those expenses relate, is earned. Prior to the application of the matching principle, expenses were charged to the income statement in the accounting period in which they were paid irrespective of whether they relate to the revenue earned during that period. This resulted in non recognition of expenses incurred but not paid for during an accounting period (i.e. accrued expenses) and the charge to income statement of expenses paid in respect of future periods (i.e. prepaid expenses). Application of matching principle results in the deferral of prepaid expenses...
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...CHAPTER 1 DECISION MAKING AND THE ROLE OF ACCOUNTING TEXT REFERENCE: Hoggett, J.R., Edwards, L., & Medlin, J., Accounting in Australia, Fifth Edition, Chapter 1. OBJECTIVES: When you have studied this chapter, you should be able to: 1. understand the nature of decisions and the decision-making process. 2. appreciate the wide range of economic decisions made in the marketplace. 3. explain the nature of accounting and its main functions. 4. identify the potential users of accounting information. 5. use information to make simple economic decisions. 6. understand the role of accounting information in the decision-making process. 7. understand the differences between accounting for management and accounting for external users. 8. understand how the accounting profession is organised in Australia. 9. identify the different areas of the economy in which accountants work. 10. understand the importance of ethics in business and accounting and how to recognise and handle ethical dilemmas as part of the decision-making process. 1 Chapter 1 STUDY TIPS FOR CHAPTER 1 1. This is an important chapter because it lays the foundation for all topics that will follow. 2. Make sure that you understand each new term as it is introduced. 3. Pay particular attention to the significance of accounting information for decisionmaking processes. 4. Identify the types of activities that are carried out...
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...Advantages of accounting concepts, conventions and regulations. There are many advantages that accounting concepts have on financial statements. Four important accounting concepts that underpin the preparation of any sets of accounts one of which is going concern that helps an account to assume for any future problems that occur in a business. This helps companies to make future plans and gives them time to gather money to sort out any financial problems. Consistency also has an advantage in helping in accounting by users of accounts can make more meaningful comparisons of financial performance. Prudence helps investors sort out financial performance such as future problems and cost of the business before recognising any signs of profits. Accruals also help financial data to be useful for users by all business revenues and cost are recorded in the appropriate statements and at the appropriate time. Conventions also have many advantages in influences financial statements to be useful for investors. Separate entity is one example this convention seeks to ensure that all private transactions and matters relating to the owners are segregated from transactions that relate to the business. This is an advantage because owner’s transactions are kept private. Also they are not mixed with the business finance so that users can clearly see the business financial state. Also materiality is also an important convention in a business financial statement use for users. The preparation...
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...anaCHAPTER 1 DECISION MAKING AND THE ROLE OF ACCOUNTING TEXT REFERENCE: Hoggett, J.R., Edwards, L., & Medlin, J., Accounting in Australia, Fifth Edition, Chapter 1. OBJECTIVES: When you have studied this chapter, you should be able to: 1. understand the nature of decisions and the decision-making process. 2. appreciate the wide range of economic decisions made in the marketplace. 3. explain the nature of accounting and its main functions. 4. identify the potential users of accounting information. 5. use information to make simple economic decisions. 6. understand the role of accounting information in the decision-making process. 7. understand the differences between accounting for management and accounting for external users. 8. understand how the accounting profession is organised in Australia. 9. identify the different areas of the economy in which accountants work. 10. understand the importance of ethics in business and accounting and how to recognise and handle ethical dilemmas as part of the decision-making process. 1 Chapter 1 STUDY TIPS FOR CHAPTER 1 1. This is an important chapter because it lays the foundation for all topics that will follow. 2. Make sure that you understand each new term as it is introduced. 3. Pay particular attention to the significance of accounting information for decisionmaking processes. 4. Identify the types of activities that are carried...
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...INTRODUCTION TO ACCOUNTING SEMINAR (1) TRUE/FALSE (NOTE: Show any required calculations in your answers) 1. A corporation is a business that is legally separate and distinct from its owners. 2. Primary users of accounting information are accountants. 3. Accounting is thought to be the "language of business" because business information is communicated to users. 4. The role of accounting is to provide many different users with financial information to make economic decisions. 5. Accounting information users need reports about the economic activities and condition of businesses. 6. The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing entities. 7. Stakeholders use only accounting reports as the source of information to base all of their business decisions. 8. Managerial accounting information is used by external and internal users equally. 9. Financial accounting provides information to all users, while the main focus for managerial accounting is to provide information to the management. 10. A business is an organization that provides goods or services to their customers in exchange for money or other items of value. 11. Managerial accounting is primarily concerned with the recording and reporting of economic data and activities of an entity for use by stockholders, creditors, governmental agencies, and the public. 12. The cost concept is the basis for entering the exchange...
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