What is Accounting?

- is the systematic and comprehensive

recording of financial transactions
pertaining to a business. Accounting also
refers to the process of summarizing,
analyzing and reporting these
transactions to oversight agencies,
regulators and tax collection entities.
 3 main reasons:
1. Financial information supplied to
external users still has a dominant
influence on internal management
information;
2. Other information specialists have
been reluctant to become involved in
detailed accounting matters; and
3. Accountants have been quick to absorb
new methods and techniques into their
work.
 Main
Branches
of
Accounting
Auditing
- is the examination and verification
of a company's financial statements and
records, and in the United States,
examination for their compliance
with Generally Accepted Accounting
Principles (GAAP).
There are 4 major steps in the audit
process:
-- Defining the terms of the engagement
between the auditor and the client
-- Planning the scope and conduct of the
audit
-- Compiling the audited information
-- Reporting the results of
the index audit
Examples;
• On a most basic level, auditing involves one
person checking another person's work. In an
organization in which at least one person
handles cash, there's the need for a daily cash
report. When one employee totals up all
payments collected for the day --- e.g., debit,
credit card, cash and check payments --- he
must log all information on the daily cash
report. Later, if another employee checks the
report to see if all numbers match the report,
she performs a basic audit of the cash report.
Examples;
An audit is the examination of an
entity's accounting records, as well as the
physical inspection of its assets. If performed by
a certified public accountant (CPA), the CPA can
express an opinion on the fairness of the
entity's financial statements
External audit
A measurement and report on the state of a
person's or business' finances, made by an external
agency. A common (and feared) example of an extern
al audit is an audit by the Internal Revenue Service
(IRS), which is done to ensure that the person or bu
siness being audited has paid the appropriate amount
in taxes. Often, companies hire audit firms to look a
t their financial states and to receive an objective a
ssessment. It is also called an outside audit.
 The objectives of an external audit
are to determine:
• The accuracy and completeness of the
client's accounting records;
• Whether the client's accounting records
have been prepared in accordance with the
applicable accounting framework; and
• Whether the client's financial statements
present fairly its results and financial
position
 External auditors
-are appointed from outside the
organization. Its job is to protect the
interests of the users of the financial
statements.
Internal auditors
-internal auditors are
employees of the
company.
Internal auditors perform routine
tasks and undertake detailed checking
of the company's accounting
procedures, whereas external auditors
are likely to go in for much more
selective testing. Nonetheless, they
usually work very closely together,
although the distinction made between
them still remains important.
Bookkeeping
-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
• Cash Flows Statement
Income Statement
- shows whether the business has
made profit or loss during the
period, i.e. it measures how well the
business has done.
Balance Sheet
-is a very
important financial
statement that
summarizes a
company's assets (what
it owns)
and liabilities (what
it owes).
Cash Flows Statement
- statement presents
the cash flows and
outflows of the
business during the
period.
 Bookkeeping is a routine
operation, while accounting
requires the ability to examine a
problem using both financial and
non-financial data.
Cost Bookkeeping, Costing,
and Cost Accounting
-is the process that involves the
recording of cost of data in books of
accounts. It is therefore, similar to
bookkeeping except that data are
recorded in very much greater detail.
•Accountants are now discourage from
using the term "costing" unless it is
qualified in some way, i.e. by referring
to some branch of costing (such as
standard costing), but even so you will
still find the term "costing" in general
use.
•The difference between bookkeeping
per se and cost bookkeeping is largely
one of degree of detail.
Cost Accounting System
-contains a great deal more data, and thus once the
data are summarized there is much more information
available to the management of the company.
-it deals with the collection, allocation, and control
of the cost of producing specific goods and services.
This accumulation and explanation of actual and
prospective cost data is important to control current
operations and to plan for the future.
Financial Accounting
-is focused on the recording of
business transactions and the
periodic preparation of reports
on financial position and results
of operations.
Financial Accountants
-accord importance to generally
accepted accounting principles.
 Financial Accounting is the more
specific term applied to the preparation
and subsequent publication of highly
summarized financial information. The
information supplied is usually for the
benefit of the owner of an entity, but it
can also be used by management for
planning and control purposes. It will also
be of interest to other parties, e.g.
employees and creditors.
Financial Management
-is a relatively new branch of
accounting that has grown
rapidly over the past 30 years.
Management Accounting
-it incorporates cost accounting data and
adapts them for specific decisions which
management may be called upon to make. A
management accounting system incorporates
all types of financial and non-financial
information from a wide range of sources.
Example of Financial Management:
-Finance management is classified
based on business activities or company's
accounts or personal account. Financial
management example for business or
company includes managing telephone cost,
hiring a new employee, purchasing of
facilities, project budgets, etc.
Taxation
-includes the preparation of
tax returns and the
consideration of the tax
consequences of proposed
business transactions or
alternative courses of action.
Tax avoidance
-is a perfectly legitimate
exercise, but tax evasion (the
non-declaration of sources of
income on which tax might be
due) is a very serious offense.
Examples ;
- of temporary differences are:
Revenues or gains that are taxable either prior
to or after they are recognized in the financial
statements. ... For example, some fixed assets
are tax deductible at once, but can only be
recognized through long-term depreciation in
the financial statements.
 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.
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.
Examples;
-federal agencies account for
quarterly apportionments to procure goods
and services, a process that is generally
ignored by state and local governments.
Thank you for
listening 