CHAPTER 1 Introduction to Accounting

CLASS NOTES Topic 1

The ACCOUNTING Process
Identifying

Measuring

Communicating

Decision Making

Account
Business transactions

Accounting vs. Bookkeeping

Illustration
Ms. Hi is a bookkeeper and Mr. Hello is an accountant. Both work for Lele
Recruitment Ltd., an IT recruitment entity established in Hanoi. The entitys head
office is in Hanoi and the entity has a branch in HCM City. Hi is a bookkeeper who
works in the HCM City office and Hello is the head accountant in the main office in
Hanoi. What do you think are the duties of Hi? What about Hello?

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Duties/Responsibilities
Prepare financial reports.
Supervise activities of the bookkeeper.
Prepare and send invoices to debtors.
Assist in the preparation of budgets.
Update and manage the accounting system
for the entity.
Calculate and distribute wages and salaries.
Print financial report and debtor listings.
Establish fund management arrangement
with banks.
Provide assistance to management in
setting prices.

Hi

Hello

1 ACCT2105 Accounting for Organisations and Society | RMIT International University

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Check customer credit ratings.

Receive invoices from suppliers.
Prepare list of overdue accounts.
Prepare bank reconciliations.

Accounting Information and its role in Decision Making

Who uses accounting information to make financial decisions?
Internal
External USERS

What information do they need to make decisions?

Financial Accounting vs. Management Accounting

What is Financial Accounting?
Financial Reports
1.) Statement of Cash Flow
2.) Income Statement (Profit and Loss or Statement of Financial
Performance)
2 ACCT2105 Accounting for Organisations and Society | RMIT International University

3.) Balance Sheet (Statement of Financial Position)

What is Management Accounting?

Financial Accounting

Management

Accounting
Regulations

Timeliness

Level of Detail

Main users

Conceptual Framework
Qualitative Characteristics of Financial Information
Relevance (what about
materiality?)
Faithful representation
Comparability
Verifiability
Understandability

Limitations of Accounting Information

Time Lag

3 ACCT2105 Accounting for Organisations and Society | RMIT International University

Historical Information
Subjectivity of information
Potential Costs of Providing Accounting Information
Information costs
Release of competitive information
Define the following terms:
Assets
Liabilities
Equity
Income
Expenses

4 ACCT2105 Accounting for Organisations and Society | RMIT International University