Basic Accounting Lesson 1

what is accounting?

• a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions.

• the accountancy profession's most significant service to the public. An independent examination that ensures the fairness and reliability of the reports that management submits to users outside the business entity.

• 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.

• to protect the interests of the users of the financial statements. By contrast, internal auditors are employees of the company. They are appointed by, and answer to, the company's management though they work independently of the accounting and other departments.

what are the branches of accounting?

• auditing

• data collection

• bookkeeping

• summarizing

• government accounting

what are the two types of auditing?

• interconnection

• internal

• external

• outside

what is auditing?

• the accountancy profession's most significant service to the public.

• recording of data

• collection of financial statements

• generic term covering almost anything

what is external audting? 3 answers

• the independent examination that ensures the fairness and reliability of the reports that management submits to users outside the business entity. the result of the examinations is embodied in the independent auditor's report.

• To perform routine tasks and undertake detailed checking of the company's accounting procedures.

• They are appointed by, and answer to, the company's management though they work independently of the accounting and other departments. They ensure the accuracy of business records, uncover internal control problems and identify operational difficulties.

• are appointed from outside the organization.

  job is to protect the interests of the users of the financial statements. whereas external auditors are likely to go in for much more selective testing.

• Once the required financial statements have been prepared by management, they have to be evaluated in order to ensure that they do not present a distorted picture.

what is internal auditing? 3 answers

• They ensure the accuracy of business records, uncover internal control problems and identify operational difficulties.

• They are appointed by, and answer to, the company's management though they work independently of the accounting and other departments.

• is the independent examination that ensures the fairness and reliability of the reports that management submits to users outside the business entity. the required financial statements have been prepared by management, they have to be evaluated.

• to perform routine tasks and undertake detailed checking of the company's accounting procedures.

• job is to protect the interests of the users of the financial statements. s are likely to go in for much more selective testing.

what is bookkeeping? 3 answers

• is a mechanical task involving the collection of basic financial data. The data are first entered in the accounting records or the books of accounts, and then extracted, classified and summarized in the form of income statement, balance sheet and cash flows statement.

• A balance sheet lists what the entity owns (its assets), and what it owes (its liabilities) as at the end of the period. The cash flows statement presents the cash inflows and outflows of the business.

• usually end when the basic data have been entered in the books of accounts and the accuracy of each entry has been tested.

• a generic term covering almost anything to do with the collection and use of basic financial data.

• It should, however, be more properly applied to the use to which the data are put once they have been extracted from the books of accounts.

accounting vs bookkeeping

(choose what is accounting)

• represents the summarizing phase

• the basis of accounting

• only and expert can practice this as it requires subject-specific skills and knowledge

• financial statements are not prepared

• provides data for managerial decision making

accounting vs bookkeeping

(choose what is bookkeeping)

• represents the recording phase

• anyone can practice this as it does not require specific skills

• basis for business language

• financial statements are not prepared

• provides data for managerial decision making

what is government accounting?

• It is concerned with the identification of the sources and uses of resources consistent with the provisions of city, municipal, provincial or national laws.

• events can be measured in monetary terms and are not recorded in the book of accounts

• internal users

• The government collects and spends huge amount of public funds annually so it is necessary that there is proper custody and disposition of these funds.