LEARNING WITH CAMME....

WHAT IS ACCOUNTING?


Accounting is the process of identifying, classifying, measuring, recording and communicating economic information and business events in monetary term to permit informed judgements and decisions by users of the information.

Bookkeeping – it is a part of the field of accounting, refers to the mechanical aspects of accounting, such as recording, classifying and summarizing transaction.


What accountants do?

1. Accountants CLASSIFY, SUMMARIZE, INTERPRET facts , TRANSLATE into useful information, and REPORT DATA to managers.

2. They suggest strategies for improving the financial condition of the company.

3. Accountants help entities be successful, ethical, responsible participants in society.

4. Accountant design and maintain accounting system.

5. Accountants also responsible for preparing several types of documents (e.g. employees’ salary and wage records)


What bookkeepers do?

1. The first task of bookkeepers is to DIVIDE ALL THE PAPERWORK INTO MEANINGFUL CATEGORIES.

2. Then they RECORD THE DATA from the original transaction documents (sales slips, etc.) into record books called JOURNALS.

3. A JOURNAL is the FIRST PLACE transactions are recorded.


PURPOSES OF ACCOUNTING

1. To help managers evaluate the financial condition and the operating performance of the firm so they may make better decisions.

2. To report financial information to people outside the firm such as owners, suppliers, and the government.


TYPES OF ACCOUNTING

1) Financial Accounting

- Financial accounting provides information to decision makers who are not involved in the day-to-day operations of an organization. The information is distributed primarily through general purpose financial statements. The focus of financial accounting is reporting on historical information. The information is reported periodically. It is often broken down into monthly, quarterly, and annual reporting periods. At a minimum, financial accounting information must be reported annually.
2) Management Accounting

- Involves providing information to an organization’s managers. Management accounting reports often include much of the same information used in financial accounting. However, management accounting reports also include a great deal of information that is not reported outside the company.

3) Cost Accounting

- To plan and control operations, managers need information about the nature of cost incurred. Cost accounting is a process of accumulating the information managers need about operating costs. It helps managers identify measure and control these costs. Cost accounting may involve accounting for the costs of products, services or specific activities. Cost accounting information is also useful for evaluating each manger’s performance.

4) Tax Accounting

- Many taxes raised by federal, state and city governments are based on the income earned by taxpayers. These taxpayers include both individuals and corporate businesses. The amount of taxes is based on what the laws define to be income. Tax accountants help taxpayers comply with these laws by preparing their tax returns. Another tax accounting activity involves planning future transactions to minimize the amount of tax to be paid.

5) Auditing

- Just as independent auditing adds credibility to financial statements, internal auditing adds credibility to report produced and used within an organization. Internal auditors not only examine record-keeping processes but also assess whether managers are following established operating procedures.

THE FUNCTION OF ACCOUNTING

Accounting is very important for the purpose of decision making. It tells where, when, how and why money has been spent. It is helpful in the evaluation of performance and indicates the financing implications of choosing one plan/ investment or project versus another. Some form or other of accounting is needed to ensure the smooth-running of all organizations. It helped users by enable assessment of amount, timing and uncertainty of prospective net cash flow to the operating enterprise.

THE JOB OF ACCOUNTANTS


• Accountants help entities be successful, ethical, responsible participants in society.

• Accountants identify, analyze, record and accumulate facts, estimates. Forecasts and other about the unit’s activities, then translate into useful information.

• Accountant design and maintain accounting system.

• Accountants also responsible for preparing several types of documents (e.g. employees’ salary and wage records)


The job of accountants nowadays not restricted to the process of collecting, recording and summarizing the accounting data. There are various employment opportunities for a person who studied in the accounting field and the job is slightly differing from one another. The four broad areas are:
a) Public Accounting – Public accountants are those who are offer their professional services to the general public for a fee. Such services include auditing, tax services, accounting services and management consultancy. Public accounting services are offered only by those who have a license to practice.

b) Private Accounting – Private accountants are those individuals who are employed by organizations in various positions such as financial accountants, management accountants, cost accountants and internal auditors.

c) Governmental Accounting – Accountants who are working in government usually are employed by a federal agency, a state agency or a local authority.

d) Educations – Some accountants become educators that they teach accounting and related courses. Some of them also engage in research and publications as well as consultancy.

USERS OF THE ACCOUNTING INFORMATION


(a) Lenders. Lenders are interested in information that enables them to determine whether their loans, and the interest attaching to them, will be paid when due.

(b) Suppliers and other trade creditors. Suppliers and other creditors are interested in information that enables them to determine whether amounts owing to them will be paid when due. Trade creditors are likely to be interested in an enterprise over a shorter period than lenders unless they are dependent upon the continuation of the enterprise as a major customer.

(c) Customers. Customers have an interest in information about the continuance of an enterprise, especially when they have a long-term involvement with, or are dependent on, the enterprise.

(d) Potential investors. They need the information in order to make a decision whether want to invest or not. Normally, the potential investors or shareholders will contribute their capital in a company that show impressive record in financial position.

(e) Governments and their agencies. Governments and their agencies are interested in the allocation of resources and, therefore, the activities of enterprises. They also require information in order to regulate the activities of enterprises, determine taxation policies and as the basis for national income and similar statistics.

(f) Public. Enterprises affect members of the public in a variety of ways. For example, enterprises may make a substantial contribution to the local economy in many ways including the number of people they employ and their patronage of local suppliers. Financial statements may assist the public by providing information about the trends and recent developments in the prosperity of the enterprise and the range of its activities.

(g) Investors. The providers of risk capital and their advisers are concerned with the risk inherent in, and return provided by, their investments. They need information to help them determine whether they should buy, hold or sell. Shareholders are also interested in information which enables them to assess the ability of the enterprise to pay dividends.

(h) Managers. Managers need to make day-to-day decision making. They need to know how well things are progressing financially and about the current status of the business.

(i) Employees. Employees and their representative groups are interested in information about the stability and profitability of their employers. They are also interested in information which enables them to assess the ability of theenterprise to provide remuneration, retirement benefits and employment opportunities.