Accounting Overview and History

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

Who is known as the father of accounting?

Alfred Marshall

Luca Pacioli (correct)

Adam Smith

John Maynard Keynes

The primary purpose of accounting is to analyze complex sources of information.

False

What year was the book 'Summa de Arithmetica' written?

1494

Accounting is often termed the __________ of business.

language Signup and view all the answers

Which of the following is NOT a type of accounting service?

Real estate Signup and view all the answers

Match the following entities with their roles:

PwC = Professional audit and assurance EY = Tax consulting KPMG = Advisory services Deloitte = Financial advisory services Signup and view all the answers

Accountability in accounting concerns only the numerical data presented to users.

False Signup and view all the answers

Name one question researchers ask to understand accountability.

Who accounts to whom? Signup and view all the answers

What is the primary focus of Financial Accounting?

Providing information primarily for owners and lenders Signup and view all the answers

Management Accounting often produces reports that are detailed and specific to certain needs.

True Signup and view all the answers

Name one source of funds for businesses mentioned in the content.

Funds from investors/shareholders, owners, or lenders Signup and view all the answers

Management Accounting is _____ in regulation.

unregulated Signup and view all the answers

Match the following characteristics with the correct type of accounting:

Nature of reports produced = Management Accounting Often has a broad overview = Financial Accounting Based on projected future information = Management Accounting Usually subject to regulation = Financial Accounting Signup and view all the answers

Which of the following best describes the reporting interval for Management Accounting?

As short as required by managers Signup and view all the answers

Financial Accounting tends to contain both financial and non-financial information.

False Signup and view all the answers

What type of information does Management Accounting often include?

Both financial and non-financial information Signup and view all the answers

Financial Accounting primarily relies on _____ information.

historical Signup and view all the answers

Which statement about Management and Financial Accounting is correct?

Management Accounting often has more detailed information than Financial Accounting Signup and view all the answers

Study Notes

Accounting

Accounting is the language of business.
Developed from capitalist thinking.
Primarily used to record business transactions.
Increasingly powerful over time with the development of GAAP (Generally Accepted Accounting Principles) and the IASB (International Accounting Standards Board).
Associated with powerful firms like PwC, EY, KPMG, and Deloitte that offer various accounting services including:
- Audit
- Assurance
- Taxation
- Management Consulting
- Valuation
- Market Research
- Actuarial
- Corporate Finance

Father of Accounting

Luca Pacioli (1445-1517) is considered the father of accounting and bookkeeping.
He wrote Summa de Arithmetica in 1494, a seminal work that contributed to the development of double-entry bookkeeping.
The first professional accounting organizations were established in 1854 in Scotland, starting with the Edinburgh Society of Accountants and the Glasgow Institute of Accountants and Actuaries.

Accounting as a Language

It communicates how information is collected and analyzed from complex sources.
Ultimately, it aims to communicate accounting information, which is primarily presented in financial reports or annual reports.
Communication involves both numerical data and narratives/notes.
Accounting is evolving toward forms of accountability.

Accountability

Accounting information is used to inform various stakeholders and ensure accountability:
- Government
- Customers/Clients
- Owners
- Suppliers
- Employees
- Communities
- Competitors
- Financial Lenders
Researchers like Agyemang highlight key questions to understand accountability:
- Who accounts to whom?
- Accountability for what?
- How and when is accountability discharged?
- What are the consequences of accountability?
Agyemang emphasizes the existence of power imbalances in accountability relationships and the importance of considering both economic and societal impacts.

Finance

A subset of accounting information focused on how businesses raise and invest funds.
Sources of funds:
- Investors/Shareholders
- Owners
- Lenders
Investments:
- Equipment
- Inventories
- Other businesses
Overlaps with accounting regarding the decision-making process.

Management vs. Financial Accounting

Financial Accounting: Primarily meets the needs of owners and lenders.
Management Accounting: Primarily meets the needs of the business owners.
Key Differences:
- Nature of reports: Financial accounting produces general-purpose reports, while management accounting produces specific-purpose reports.
- Level of detail: Management accounting reports are often very detailed, while financial accounting provides a broader overview.
- Regulations: Financial accounting is subject to accounting regulations, while management accounting is unregulated.
- Reporting interval: Financial accounting reports are typically annual and biannual, while management accounting reports' intervals are dictated by managerial needs.
- Time orientation: Financial accounting focuses on historical data, while management accounting considers both historical and projected future information.
- Range and quality of information: Management accounting incorporates financial and non-financial information, including non-verifiable data, while financial accounting prioritizes objective and verifiable financial information.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This quiz explores the fundamentals of accounting, its evolution, and significant figures like Luca Pacioli, the father of accounting. Understand the roles of major firms and the importance of GAAP in today’s business environment.