ITBTM 312 Accounting Lesson 1 PDF

Lesson 1: Accounting and its Environment What is Accounting?  According to the American Accounting Association “Accounting is the process of identifying, measuring and communicating economic information to permit inform...

Lesson 1: Accounting and its Environment What is Accounting?  According to the American Accounting Association “Accounting is the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information”. “Accounting is a service activity. To provide quantitative information , primarily financial in nature, about economic entities that is intended to be useful in making economic decisions”. “Accounting is an information system that measures, processes and communicates financial information about an economic entity. “Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events.  Selling people’s time Buying and selling Designing products, Growing or extracting Selling the utilization of products aggregating raw material infrastructure components and assembling finished products. Receiving Deposits, Pooling premiums of Lending and Investing many to meet claims of Money a few This business organization Is a business owned by its has a single owner called stockholders. It is an the proprietor who generally artificial being created by is also the manager. operation of law, having the rights of succession and the is a business owned and powers, attributes and operated by two or more persons properties expressly who bind themselves to contribute authorized by law or money, property, or industry to a incident to its existence. The common fund, with the intention stockholders are not of dividing the profits among personally liable for the themselves. corporation’s debts. Are the methods an It involves the use of organization uses to obtain resources to design, financial resources from produce, distribute, and financial markets and how it market goods and services. manages these resources. Having the right mix of managers use capital from resources is essential to financing activities to acquire efficient and effective other resources used in the operations. transformation process. To transform resources from one form to a different form. The accounting function is part of the business system, and does not operate in isolation. It handles the financial operations of the business but also provides information and advice to other departments.  In Pacioli’s book introduces the Ledger is an alphabetical listing of double-entry accounting system. In all the business’s accounts along which for every debet dare (should with the running balance of each give) there exist a debet habere particular account. (should have or should receive). Memorandum is the book where all Journal is the merchant’s private transactions are recorded, in the book. The entries made here are in currency in which they are conducted, at one currency, in chronological order, the time they are conducted. It prepared and in narrative form. in chronological order, is a narrative description of the business’s economic events. Entity Stable Concept Monetary Unit Concept Periodicity Going Concept Concern  Objectivity Principle Adequate Disclosure Historical Cost Materiality Revenue Recognition Consistency Principle Principle Expense Recognition Principle Case 1 Fe, Maria and Ana were partners in a financing firm. Fe and Ana had gone for a meeting in Japan for analyzing business prospects in that country. In the meanwhile, Maria invested a huge amount in buying shares of a new company by borrowing money form Rogers. This turned out to be a bad deal as the share prices soon fell down. When Fe and Ana came back, they said they were not liable to pay to Rogers as they did not take the money. On the basis of the given information, answer the following questions: 1. Were Fe and Ana right in doing so? 2. Under which aspects of partnership are they bound? Explain.