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Accounting

In: Business and Management

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WHAT IS ACCOUNTING?
Identify

Communicate

What is the purpose of accounting ?

Measure

Record

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8/13/2014

WHAT IS ACCOUNTING?


Accounting information is important because it…
 Assists

decision making  Provides information about the past, present and future performance of an entity  Measures business activity
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WHO USES ACCOUNTING DATA?
Internal users External users  Managers who plan,  Investors who make organise and run the decisions to buy, hold or business sell shares  e.g., marketing  Creditors who evaluate managers, production risks of giving credit and supervisors, chief lending money financial officers, other  e.g., suppliers, bankers employees  Government and regulatory bodies


e.g., ATO, ASIC
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GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
In order to measure, process and communicate financial information, accountants follow rules, principles and standards.  These rules, principles and standards are set by
    

International Accounting Standards Board (IASB) Australian Accounting Standards Board (AASB) Financial Reporting Council (FRC) Australian Securities & Investment Commission (ASIC)

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SOME PRINCIPLES AND ASSUMPTIONS

Time period •Economic information can be captured and communicated over short periods of time

Monetary unit assumption •Only data that can be expressed in terms of money is included in the accounting records

Economic entity assumption •Can be any organisation or unit in society •Activities of the entity must be kept separate and distinct from activities of the owner and all other economic entities

Going concern assumption •The assumption that an entity will continue to operate in the foreseeable future

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FINANCIAL STATEMENTS
Four financial statements are prepared from the summarised accounting data  Each statement provides...

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