IM 1351: Introduction to Accounting and Its History

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Questions and Answers

Which of the following is NOT a primary user of accounting information?

Employees and trade unions (correct)

Rating agencies

Investors (existing & potential)

Board of Directors

What is the main focus of Financial Accounting and Reporting?

Providing information about the organization's employees

Providing information about the organization's internal users

Providing information about the organization's management structure

Providing information about the financial position, performance, and changes in financial positions (correct)

What is the purpose of schedules and guiding notes in Financial Accounting and Reporting?

To provide information about the organization's employees

To provide information about the organization's internal users

To provide information about the organization's management structure

To ensure that the information is authentic and clear (correct)

Which of the following is a branch of accounting that deals with the examination and evaluation of financial statements?

Auditing Signup and view all the answers

What is the role of authoritative pronouncements and regulatory rules in Financial Accounting and Reporting?

To provide guidance on the preparation of financial statements Signup and view all the answers

What is the primary goal of the accounting process?

To permit informed judgments and decisions by users of the information Signup and view all the answers

According to the American Institute of Certified Public Accountants, what is accounting?

The art of recording, classification and summarizing financial transactions Signup and view all the answers

What is the second stage of the accounting process?

Recording those events in a systematic and chronological manner Signup and view all the answers

Who are the primary users of accounting information according to the IASB Conceptual Framework for Financial Reporting?

Investors and creditors Signup and view all the answers

What is the final stage of the accounting process?

Communicating the collected information to interested users Signup and view all the answers

What is the purpose of classification of users of accounting information?

To identify the decision-making needs of users Signup and view all the answers

Where is the origin of accounting traced back to?

Mesopotamia Signup and view all the answers

Who is credited as the father of accounting?

Luca Pacioli Signup and view all the answers

What led to the development of more advanced accounting systems?

The onset of the industrial revolution Signup and view all the answers

What was the title of Luca Pacioli's work that described the system of double-entry bookkeeping?

Summa de Arithmetica, Geometria, Proportioni et Proportionalita Signup and view all the answers

What was a result of the development of corporations?

Larger groups of investors and more complex structures of ownership Signup and view all the answers

What is the basis of today's accounting systems?

The system of debits and credits in journals and ledgers Signup and view all the answers

What is the main area of focus in the Companies Act No 07 of 2007?

Accounting records Signup and view all the answers

According to the Companies Act, what is the obligation of the board of directors of a managing company of a fund?

To ensure that all listing requirements are met on a continuous basis Signup and view all the answers

What is the Act that deals with the regulation of the insurance industry?

Regulation of the Insurance Industry Act, No. 43 of 2000 Signup and view all the answers

What are the contents and form of according to the Companies Act?

Financial statements and group financial statements Signup and view all the answers

What is the Act that deals with the Finance Business?

Finance Business Act, No. 42 of 2011 Signup and view all the answers

What is the Section of the Companies Act that deals with auditors' access to information and attendance at AGM?

Section 154-165 Signup and view all the answers

What is the main purpose of accounting standards?

To determine the policies and practices of financial accounting Signup and view all the answers

Which international body has Sri Lanka's accounting standards converged with?

International Accounting Standards Board (IASB) Signup and view all the answers

What is the main function of the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB)?

Monitoring the application of accounting standards Signup and view all the answers

Which of the following companies is not a Specified Business Enterprise (SBE)?

Private companies with an annual turnover of LKR 1 million Signup and view all the answers

What is the minimum annual turnover required for a non-listed company to be considered a Specified Business Enterprise (SBE)?

LKR 500 million Signup and view all the answers

Which Act governs standard setting and monitoring of compliance in Sri Lanka?

Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 Signup and view all the answers

Study Notes

Stakeholders/Users of Accounting Information

Internal users: Management, Employees, and Internal Auditors
External users: Investors, Government and regulatory authorities, Partners/ Owners, Lenders, Customers, Rating agencies, Financial analysts, and Academics
Primary users: make decisions based on financial information
Secondary users: have an indirect interest in the company

Branches of Accounting

Financial Accounting
Management Accounting
Cost Accounting
Auditing
Tax Accounting
Fund Accounting
Government Accounting
Forensic Accounting
Fiduciary Accounting
Sustainability Accounting

Scope of Financial Accounting and Reporting

Provides information about financial position, performance, and changes in financial positions
Focuses on authentic and clear information
Follows authoritative pronouncements and regulatory rules

Definition of Accounting

"The art of recording, classification 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." - AICPA
"The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information." - American Accounting Association

Accounting Activities

Identifying economic transactions and events
Recording events in a systematic and chronological diary
Communicating information to interested users through accounting reports

History of Accounting

Traced back to Mesopotamia thousands of years ago
Developed alongside writing, counting, and money
Luca Pacioli described the system of double-entry bookkeeping in 1494

Accounting in Decision Making

Identifies, records, and communicates economic transactions and events
Provides information for informed judgments and decisions

Sri Lankan Regulations

Companies Act No. 07 of 2007
Accounting and Auditing Standards Act No. 15 of 1995
Finance Act No. 38 of 1971
Inland Revenue Act No. 24 of 2017
Employees' Provident Fund Act

Accounting Standards

Provide standardized guiding principles for financial accounting
Converged with International Accounting Standards Board (IASB) standards
Governed by Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995

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Description

Explore the roots of accounting, from its ancient origins in Mesopotamia to its development alongside writing, counting, and money. Learn about the father of accounting, Luca Pacioli, and his contributions to the field.