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Financial statements should be prepared on a going concern basis unless management either intends to liquidate the enterprise or to cease trading, or has no realistic alternative but to do so

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The business will continue in operational existencefor the foreseeable future

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slide 86

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slide 84

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slide 82

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Principles are bases for qualitative accounting information.

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Principles are bases for qualitative accounting information.

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slide 78 chap 1

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slide 69 chap 1

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Expense is recognized in the period in which related revenue is recognized (Matching Principle).

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a. Revenue is earned
b. Revenue is realized or realizable

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slide 77 chap 1

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slide 66 chap1

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Recording and measuring income, expense, net earnings

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Recording and measuring income, expense, net earnings

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states that businesses must record and account some financial elements (inventory, securities holdings) under certain conditions that owners report at the end of an accounting period at the lower of either (a) historical cost or (b) value in the market..

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is the highest estimated price that a buyer would pay and a seller would accept for an item in an open and competitive market.

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The financial elements cost or price that owners report at the end of an accounting period must be adjusted for changes in the market or economy and changes due to inflation.

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Transactions are recorded at their cost when they occurred instead of current value.

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The historical cost principle states that businesses must record and account for elements of financial statements (most assets and liabilities) at their purchase or acquisition price

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Historical cost is a term used instead of the term cost.

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slide 48 c1

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slide 49 chap1

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The time period concept (also known as periodicity concept, accounting time period concept, time period assumption) states that the life of an entity can be divided into equal time periods.

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If transactions are in other currencies,  must be translated into the accounting currency.

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Accounting currency and home currency might bedifferent.

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A specific unit of currency used in recording transactions within the financial books of a company or business.

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Definition: The money measurement concept states that a business should only record an accounting transaction if it can be expressed in terms of money.

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It does not have to be a legal entity and can comprise only a portion of an entity or two or more entities

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A reporting entity is an entity that chooses, or is required, to present general purpose financial statements

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Any private and personal incomes and expenses of the related parties should not be treated as the incomes and expenses of the business

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Note: The business and its owner(s) are two separate existence entity

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Definition: The business entity concept states that the transactions associated with a business must be separately recorded from those of its owners or other businesses.

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5.Accounting concepts and accounting principles

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5.Accounting concepts and accounting principles

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Requires financial information to be understandable or comprehensible

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Means providing information to decision makers in time to be capable of influencing their decisions

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Helps to assure users that information represents faithfully what it purports to represent

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Comparable information enables comparisons within the entity and across entities

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No inaccuracies and omissions.

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Fairness and freedom from bias.

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Adequate or full disclosure of all necessary information.

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Enables users to check and confirm earlier predictions or evaluations.

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Helps users in predicting future outcomes.

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6.1 The fundamental qualitative characteristics

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6.1 The fundamental qualitative characteristics

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6. Requirements for accounting information

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6. Requirements for accounting information

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External decision makers need accounting information to make decisions related to investing, grating of credit, complying with law as well as other regulatory organizations:
- Should I invest money in this business?
- Will the business be able to repay money lent to it?
- How much income tax should be collected?

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Internal decision makers (managers): need accounting information for planning, controlling the operations of business.

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Financial Accounting & Managerial Accounting: Comparision

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Financial Accounting & Managerial Accounting: Comparision

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Prepare and provide financial statements to users

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Accounting document -> Journal -> Ledger -> Trial balance -> Financial statements

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Accounting software, computer, office,....

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Accounting report.

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Economic events (economic transactions).

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is the person who does the accounting.

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Accounting is highly subjective

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Accounting has formed due to the demand for information of economic management.
Accounting is associated with specific business entity.
The characteristics of accounting information are past and quantitative.
Accounting has formed with arithmetic, writing and currency.

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Institute of Chartered Accountants in England and Wales, is established by royal charter in 1880.
In the United States the American Institute of Certified Public Accountants was established in 1887.

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Observe; Measure; Calculate; Record.

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Modern Accounting is a product of centuries of
thought, custom, habit, action and convention.
Two concepts have formed the current state of the
accountancy profession:
+ The development of the double entry book keeping
system.
+ Accountancy professionalization.

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Luca Pacioli is the father of accounting who introduced
Double Entry System of account in 1494 at Venice in
Italy.
Pacioli declares that a successful merchant needs three
things sufficient cash or credit, good keepers and an
accounting system which allows him to view his finances
at a glance.
Double entry book keeping was developed in the 14 th
century in Italy.

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The scope of the accounting information at the emperor's disposal suggests that its purpose encompassed planning and decision making.
Records of cash commodities and transactions were kept scrupulously by military personnel of the Roman army.

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Accounting records dating back more than 7 000 years have been found in Mesopotamia.
The early development of accounting was closely related to developments in writing counting and money. Maybe related to the taxation and trading activities of temples.
Other early accounting records were also found in the ruins of ancient Babylon Assyria and Sumer which date back more than 7 000 years.

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1. The history and development of Accounting

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1. The history and development of Accounting

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                                  OVERVIEW OF

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                                  OVERVIEW OF