Introduction To Accounting PDF

Business World introduction to accounting Discover the fundamental principles and practices of business accounting. Explore how financial records and reporting are essential for effective management and decision-making in any organization. Chapter 1. content: 1. Definition to Accounting 2....

Business World introduction to accounting Discover the fundamental principles and practices of business accounting. Explore how financial records and reporting are essential for effective management and decision-making in any organization. Chapter 1. content: 1. Definition to Accounting 2. Importance of Accounting 3. The Accountant Responsibilities 4. The Accounting Branches 5. The Accounting Principles 6. Accounting Terminologies 7. Financial Statements 8. The Accounting Cycle Learning Objectives 1. Define accounting 2. Understand their importance 3. Identify the accounting cycle 4. Recognize basic accounting concepts and objectives  Profit (Operation Results) Capital (Capital Funds) The Company The Owner  What is Accounting ? Accounting is the process of recording, summarizing, and reporting the financial transactions. Importance of Accurate Financial Records Maintaining accurate and up-to-date financial records is crucial for the success and long-term sustainability of any business. Accurate records help businesses track income, expenses, assets, and liabilities, Ensuring compliance with tax regulations Providing a comprehensive understanding of the company's financial standing. Why accounting is important? Financial Position Financial Planning Tracks profitability and Helps in the financial planning growth for the company for the organization Financial Accuracy Financial Protection Ensuring the accuracy and validity of financial Preserves the money of the transactions within the company owners company The Accountant responsibilities Recording financial transactions and ensuring their accuracy Preparing financial reports for senior management and decision makers Dealing with taxes and ensuring that accounts comply with tax laws Calculating costs and helping to increase the company’s profits Accounting branches There are 3 Branches of Accounting Financial Managerial Tax Accounting Accounting Accounting Focuses on Manages Prepares financial internal decision- compliance with statements for making tax laws. external users. Ex: Calculating Ex: Filing income Ex: Reporting a the cost of tax returns. company's annual producing a revenue product.  Key accounting concepts Business Entity Money Measurement Dual Aspect Concept Concept Concept Separate between Only documented Every transaction business money and transactions measurable affects at least two personal owners money in monetary terms are accounts.. recorded.  accounting principles Revenue and expenses are recognized when Accrual they are earned or incurred, not when cash is Principle received or paid. Example: A consulting firm provides services worth $10,000 in December but receives payment in January. Under the accrual principle, the $10,000 is recorded as revenue in December when the service was rendered, not in January when cash was received.  accounting principles Assumes that a business will continue to On Going Principle operate in the future unless evidence suggests otherwise. Example: Ahmed is a retail company plans to continue its operations, assuming the business will not liquidate.  accounting principles Assets and liabilities are recorded at their Historical Cost Principle original purchase cost, not at their current market value. Example: A company buys land for $100,000. Even if the land’s market value increased to $120,000 a year later, the company will still report the land at $100,000 in its financial statements..  accounting principles Matching Expenses should be recognized in the same Principle period of its revenues. Example: A manufacturer sells goods for $20,000 in March 2024. The cost of producing those goods, $12,000, it must be recorded as an expense in March2024 to match it with its revenue generated. Revenue Cost March 2024 $20,000 $12,000 December 2024 $100,000 $60,000  accounting principles Business Entity A business's financial records are separate Principle from owners personal financial transaction. Example: The owner of a sole trading activity uses $1,000 from their personal account to pay a business bill. The $1,000 is recorded as an owner’s contribution in the business’s books, keeping personal and business transactions separate..  accounting Activity First Project Digital Marketing Agency. ( CA 5000$ ) Required: 1. List the Expenses you will Second SecondProject Project Coffee Shop. ( CA 30000$ ) pay with the amount 2. Expect how much the Third Project Restaurant. ( CA 60000$ ) Revenue will be 3. Define your team work 4. Search for the Salary for Fourth Project Tourism Agent. ( CA 60000$ )each employee 5. How you will deal with financial Problems  Basic accounting terminologies Assets Resources owned (e.g., cash, buildings). Liabilities Amounts owed (e.g., loans, accounts payable). Equity Owners' money in the company ( Retained Earnings) Revenue Income earned from sales or services. Expenses Costs incurred to generate revenue ( Rent, …. etc) Debit and Credit Increases and decreases in accounts. Financial Statements Balance Sheet, Income Statement, and Cash Flow Statement Balance Sheet Income Cash Flow Statement Statement Provides a Measures a Outlines the inflows and snapshot of a company's financial outflows of cash, helping company's performance by to understand a assets, liabilities, tracking its company's liquidity and and equity at a revenues, expenses, ability to meet financial specific point in and net income over obligations. time. a period of time. Balance Sheet Accounts ASSETS LIABILITIES Income statement Accounts  How to Record financial transactions ? Through Accounting Cycle  What is Accounting Cycle? “It’s a series of steps followed to record and process financial transactions, culminating in the preparation of financial statements”  Accounting Records Journal Entry General Ledger Trial Balance  Example Identify A business buys raw Transaction materials for $500 in cash. Debit: Raw material 500$ Record in the Journal Credit: Cash 500$ Post to the Raw material Account 500$ Ledger Cash Account 500$ Prepare Account Name Debit ($) Credit ($) Raw Material 500 $ Trial Balance Cash 500 $  Example Prepare |Revenue| $500 Financial Income Statement |Expenses| $ 300 Statements |Net Income| $200 Closing Closing Revenue & Debit: Revenue 500$ Entries Expenses Accounts Credit: Retained Earnings 500$  Transaction Identification Close temporary Recognize financial Record Enter transactions in Closing accounts like revenue transactions that Transactions the journal as debit Entries need recording in the Journal and expenses. and credit entries Prepare Summarize ledger Transfer journal Create Financial Financial Post to the accounts to ensure Ledger entries to the general statements. Statements debits equal credits. ledger accounts. Prepare a Trial Balance  Business World Thank YOu We hope you found this overview of business accounting informative and valuable. By understanding the fundamental principles and implementing effective financial management strategies, you can enhance your business's financial performance and drive success.