Accounting

The Accounting Environment

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Learning objectives

After studying this introduction, you should be able to:
Define accounting.
Describe the functions performed by accountants.
Describe employment opportunities in accounting.
Differentiate between financial and managerial accounting.
Identify several organizations that have a role in the development of financial accounting standards.

International Financial Reporting Standards

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A reporting entity (which we will call “entity” from here onwards) is either a company or a group of companies, which are all controlled by the same decision maker, i.e. normally the same board of directors. This occurs when the board of directors of a company controls directly or indirectly a number of other companies, by holding directly or indirectly the absolute or relative majority of the voting rights of other companies.

Introduction to Accounting

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Accounting Information

You likely have a general concept of what accountants do. They capture information about the transactions and events of a business and summarize that activity in reports that are used by persons interested in the entity. But, you likely do not realize the complexity of accomplishing this task. It involves a talented blending of technical knowledge and measurement artistry that can only be fully appreciated via the extensive study of the subject.

Information Processing

Last updated Apr 29, 2020 Hits: 20,536 Accounting Created by Conspecte Team

Accounts, Debits, and Credits

The previous chapter showed how transactions caused financial statement amounts to change. “Before” and “after” examples, etc. was used to develop the illustrations. Imagine if a real business tried to keep up with its affairs this way! Perhaps a giant chalk board could be set up in the accounting department.

As transactions occurred, they would be called in to the department and the chalk board would be updated. Chaos would quickly rule. Even if the business could manage to figure out what its financial statements were supposed to contain, it probably could not systematically describe the transactions that produced those results. Obviously, a system is needed.

Analysis and interpretation of the annual report

Last updated Apr 28, 2020 Hits: 10,029 Accounting Created by Conspecte Team

Statement of changes in equity: its contents and informational aims

The statement of changes in equity shows a detail of the changes of the equity from the beginning to the end of the year. The main reason for the equity to change is, as explained in section 4.3 above, due to the retained profit contribution to the distributable reserves. However, many other events can affect the equity.