This document provides an overview of the Financial Accounting course MGT412. It includes definitions of key accounting terms like assets, liabilities, revenue, and expenses. It describes the objectives and components of an accounting information system. It also summarizes important accounting concepts like the revenue recognition, matching, and cost principles. The document lists the primary financial statements and their objectives. Finally, it distinguishes between bookkeeping and accounting.
This document provides an overview of the Financial Accounting course MGT412. It includes definitions of key accounting terms like assets, liabilities, revenue, and expenses. It describes the objectives and components of an accounting information system. It also summarizes important accounting concepts like the revenue recognition, matching, and cost principles. The document lists the primary financial statements and their objectives. Finally, it distinguishes between bookkeeping and accounting.
This document provides an overview of the Financial Accounting course MGT412. It includes definitions of key accounting terms like assets, liabilities, revenue, and expenses. It describes the objectives and components of an accounting information system. It also summarizes important accounting concepts like the revenue recognition, matching, and cost principles. The document lists the primary financial statements and their objectives. Finally, it distinguishes between bookkeeping and accounting.
This document provides an overview of the Financial Accounting course MGT412. It includes definitions of key accounting terms like assets, liabilities, revenue, and expenses. It describes the objectives and components of an accounting information system. It also summarizes important accounting concepts like the revenue recognition, matching, and cost principles. The document lists the primary financial statements and their objectives. Finally, it distinguishes between bookkeeping and accounting.
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FINANCIAL ACCOUNTING
COURSE CODE: MGT412
Semester 1 Credit hour 03 UNIT:1 INTRODUCTION
CONTENTS 1. Meaning 2. Objective necessities of accounting 3. Principles of Financial Accounting 4. Components of AIS 5. Financial Statements 6. Accounting concepts 7. Accounting v/s book keeping Financial accounting It is a specific branch of accounting involving a process of recording, summarizing, and reporting the myriad of transactions resulting from business operations over a period of time. These transactions are summarized in the preparation of financial statements, including the balance sheet, income statement and cash flow statement, that record the company's operating performance over a specified period. Objective Necessities of Accounting
1. Identification and Recording of Transactions.
2. Preparing Balance Sheet. ... 3. Keeping records of Cash Transactions. ... 4. Evaluate and Control Assets and Liabilities. ... 5. Preventing Money Defalcation and Cost. ... 6. Detection and Prevention of Errors. 7. Preparing Profit and Loss Statement. Principles of Financial Accounting
1. The Revenue Recognition Principle states that revenue should be recognized when it
has been earned. This principle dictates how much revenue should be recorded, the timing of when that revenue is reported, and circumstances in which revenue should not be reflected within a set of financial statements. 2. The Cost Principle states the basis for which costs are recorded. This principle dictates how much expenses should be recorded for (i.e. at transaction cost) in addition to properly recognizing expenses over time for appropriate situations 3. The Matching Principle states that revenue and expenses should be recorded in the same period in which both are incurred. This principle strives to avoid a company from recording revenue in one year with the associated cost of generating that revenue in a different year. This principle dictates the timing in which transactions are recorded. 4. The Full Disclosure Principle states that the financial statements should be prepared using financial accounting guidance that includes footnotes, schedules, or commentary that transparently report the financial position of a company. This principle dictates the amount of information provided within financial statements. 5. The Objectivity Principle states that while financial accounting has aspects of estimations and professional judgment, a set of financial statements should be prepared objectively and free from personal bias. This principle dictates the aspects where technical accounting should be used as opposed to personal opinion. Components of an Accounting Information System 1. People, 2. Data, 3. Software, 4. Procedure, 5. Information Technology and Internal Controls. Accounting terms
Liabilities Business Capital Drawings – (Non-Current Transaction and Current) –
Assets (Non- Fixed assets Expenditure
Current and (Tangible and (Capital and Expense Current Intangible) – Revenue) –
Income Gain Loss. Purchase –
Sales – Goods Stock Debtor Creditor
Users of Financial Accounting/Financial Statements
1. Investors 2. Auditors 3. Regulatory Agencies 4. Suppliers 5. Banks Financial Statements 1.CONCEPT It is written records that convey the business activities and the financial performance of a company, these are often audited by government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes. 2. Objective To provide information about the financial position, performance and change in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Primary financial statements include
1. Balance sheet, 2. Income statement, 3. Statement of cash flow, 4. Statement of changes in equity Some Generally accepted Accounting Principles Accounting Concepts 1. Business entity: concept states that the transactions associated with a business must be separately recorded from those of its owners or other businesses. Doing so requires the use of separate accounting records for the organization that completely exclude the assets and liabilities of any other entity or the owner. 2. Matching: concept that dictates that companies report expenses at the same time as the revenues they are related to. Revenues and expenses are matched on the income statement for a period of time. 3. Cost: the term cost refers to the monetary value of expenditures for raw materials, equipment, supplies, services, labor, products, etc. It is an amount that is recorded as an expense in bookkeeping records. Revenue: It is the money generated from normal business operations, calculated as the average sales price times the number of units sold. It is the top line (or gross income) figure from which costs are subtracted to determine net income. Revenue is also known as sales on the income statement. Money measurement : concept that is based on the theory that a company should be recording only those transactions that can be measured or expressed in monetary terms on the financial statement. Money measurement concept is also known as Measurability Concept, which states that during the recording of any financial transactions, those transactions should not be recorded which cannot be expressed in terms of monetary value. Accounting period: any time frame used for financial reporting. Transactions that fall within a given date range form part of the statements or reports for that accounting period. An accounting period, or reporting period, is often 12 months. There may be different accounting periods for various business tasks. Bookkeeping v/s Accounting
