Introduction to Accounting and Bookkeeping

Accounting is the process of recording, classifying, and summarizing financial transactions and events to provide useful information for decision-making.

Accounting is 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 a financial character, and interpreting the results thereof.

Bookkeeping is the process of systematically and completely recording all financial transactions of an organization by the bookkeeper.

Bookkeeping involves documenting every financial transaction to create a base for the accounting process. The goal is to accurately show income and expenses at the end of an accounting period.

Accounting focuses on summarizing, analyzing, and interpreting financial transactions to provide insights for decision-making. It goes beyond mere recording.

Accounting provides an organized and systematic approach to managing financial data, creating a comprehensive picture of the company's financial health.

The Golden Rules are fundamental principles that guide the recording of transactions in accounting. They help ensure accuracy and consistency in financial reporting.

The Golden Rules of Accounting: 1. Debit what comes in, Credit what goes out. 2. Debit the receiver, Credit the giver. 3. Debit all expenses and losses, Credit all incomes and gains.

The first step in the accounting cycle is recording transactions in the books of original entry. This involves documenting every transaction with details like date, amount, and description.

The next step is posting the recorded transactions from the books of original entry to the ledger. This involves categorizing transactions by account and summarizing their balances.

Preparing the Trial Balance involves summarizing the balances of all accounts in the ledger. It verifies the accuracy of the accounting process.

Preparing the Final Accounts is the final stage, involving the creation of the income statement, balance sheet, and cash flow statement. These reports provide a comprehensive view of the company's financial performance.

Internal Users are individuals within the organization who use accounting information to make decisions related to their roles. Examples include managers, employees, and internal auditors.

External Users are individuals or entities outside the organization who use accounting information to assess its financial health and make investment or lending decisions. Examples include investors, creditors, and government agencies.

Principles that provide a framework for preparing accounting reports to ensure consistency and comparability across different organizations.

Financial statements prepared by accountants are used by various stakeholders for decision-making. This emphasizes the importance of uniform accounting practices.

Consistency in applying accounting principles over time is crucial for accurate financial reporting.

The process of recording, classifying, and summarizing financial transactions to provide a comprehensive picture of a business's financial position.

The backbone of the accounting information system, GAAPs define the parameters and constraints for generating accurate and reliable accounting reports.

Accounting software features make accounting easier and more efficient. They often include features like data entry, reporting, and analysis to help businesses manage their finances.

Computerized accounting offers advantages like improved accuracy, efficiency, and better control over financial data. It also reduces manual errors and allows for faster analysis.

Computerized accounting has some disadvantages like the initial cost of software and hardware, the need for specialized skills, and potential vulnerabilities to technical issues like power outages or viruses.

Equity share capital is a permanent source of finance where shareholders have voting rights and share in the company's profits. It offers flexibility but comes with the risk of dilution.

Preference share capital is a long-term source of finance with a fixed rate of return and no voting rights. It provides a stable income stream for investors.

Borrowed funds are non-permanent sources of finance, taken as loans or debt, with fixed interest rates. They provide short-term capital but require repayment.

Lease financing allows using an asset without buying it outright. Instead, you pay periodic lease payments as a form of rental.

Term loan is a long-term loan with regular installments and a specific repayment period. It provides substantial capital for large projects.