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Accounting Basics Pakistanmba.jimdo.com

Accounting Basics Pakistanmba.jimdo.com

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Published by Sophia Ali

http://Pakistanmba.jimdo.com
For Free Downloading of this report and for more projects,assignments,reports on Marketing,Management
Marketing Management,
Accounting,
Economics
Human Resource,
Organizational Behaviour,
Financial Management
Cost Accounting
VISIT
http://Pakistanmba.jimdo.com

http://Pakistanmba.jimdo.com
For Free Downloading of this report and for more projects,assignments,reports on Marketing,Management
Marketing Management,
Accounting,
Economics
Human Resource,
Organizational Behaviour,
Financial Management
Cost Accounting
VISIT
http://Pakistanmba.jimdo.com

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Published by: Sophia Ali on May 12, 2009
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HTTP://PAKISTANMBA.JIMDO.COMFOR DOWNLOADING THIS REPORT AND FOR MOREPROJECTS, ASSIGNMENTS, REPORTS ONMARKETING,MANAGEMENT,ECONOMICSMARKETING MANAGEMENT,ACCOUNTING,HUMAN RESOURCE,ORGANIZATIONAL BEHAVIOR,FINANCIAL MANAGEMENTCOST ACCOUNTINGVISITHTTP://PAKISTANMBA.JIMDO.COM
Introduction
Financial accountancy
(or 
financial accounting
) is the field of accountancy concerned with the  preparation of financial statements for decision makers, such asstockholders, suppliers, banks, employees,government agencies, owners, and other stakeholders. The fundamental need for financial accounting is to reduce principal-agent problemby measuring and monitoring agents' performance and reporting the results to interested users.Financial accountancy is used to prepare accounting information for people outside theorganization or not involved in the day to day running of the company.Managerial accounting  provides accounting information to help managers make decisions to manage the business.
Objective of Financial Accounting (FA):
The objective of financial accounting is to collect accurate, systematic, and timely financial dataand other financial information, and to compile and consolidate it in an organized and systematicway, according to the principles and rules of accounting, for reporting purpose.
 
The financial managers use these reports to assess the financial position of the company throughvarious financial management tools and then the financial position can be compared to, or  benchmarked against, the industry norms. The four different financial statements used for the purpose of reporting and analysis are1. Balance Sheet2. P/L or Income Statement3. Cash Flow Statement4. Statement of Retained Earnings (or Shareholders’ Equity Statement)In financial accounting, assets are recorded on the basis of historical costs in the balance sheet,i.e., the assets are recorded at their original purchase price. Of course, the depreciation on theasset is duly subtracted from its original value as the asset remains in use of the business.However, in financial management, book value is seldom used and financial managers consider the market value and the intrinsic value of assets.Market value may be defined as the value currently prevailing in the market or the value atwhich the sellers are ready to sell, and buyers are ready to buy a particular asset.Intrinsic value or the fair value is calculated by summing up the discounted future cashflowsObjective of Financial Accounting (FA):The objective of financial accounting is to collect accurate, systematic, and timely financial dataand other financial information, and to compile and consolidate it in an organized and systematicway, according to the principles and rules of accounting, for reporting purpose.The financial managers use these reports to assess the financial position of the company throughvarious financial management tools and then the financial position can be compared to, or  benchmarked against, the industry norms. The four different financial statements used for the purpose of reporting and analysis are1. Balance Sheet2. P/L or Income Statement3. Cash Flow Statement4. Statement of Retained Earnings (or Shareholders’ Equity Statement)In financial accounting, assets are recorded on the basis of historical costs in the balance sheet,i.e., the assets are recorded at their original purchase price. Of course, the depreciation on theasset is duly subtracted from its original value as the asset remains in use of the business.However, in financial management, book value is seldom used and financial managers consider the market value and the intrinsic value of assets.Market value may be defined as the value currently prevailing in the market or the value atwhich the sellers are ready to sell, and buyers are ready to buy a particular asset.Intrinsic value or the fair value is calculated by summing up the discounted future cash flowsTHE
IMPORTANCE OF FINANCIAL INFORMATION.
A.Financial information is the
HEART OF BUSINESS MANAGEMENT.
 1.Most of us know almost nothing about accounting from experience.
 
2.However, you have to know something about accounting if you want tounderstand business.3.It is almost impossible to run a business effectively without being able toread, understand, and analyze accounting reports and financial statements.B.Accounting reports and financial statements are as revealing of the HEALTH OFA BUSINESS as pulse rate and blood pressure reports are in revealing the healthof a person.II.
WHAT IS ACCOUNTING?
 A.
ACCOUNTING
is the recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties with the information they need to make good decisions.1.
FINANCIAL TRANSACTIONS
include buying and selling goods andservices, acquiring insurance, using supplies, and paying taxes.2.An ACCOUNTING SYSTEM is the methods used to record andsummarize accounting data into reports.B.
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.C.Accounting is the measurement and reporting of financial information to varioususers regarding the economic activities of the firm.III.
AREAS OF ACCOUNTING.
 A.Accounting has been called the
LANGUAGE OF BUSINESS,
but it also is thelanguage used to report financial information about nonprofit organizations.B.
MANAGERIAL ACCOUNTING.
 1.
MANAGERIAL ACCOUNTING
is used to provide information andanalyses to managers within the organization to assist them in decisionmaking.2.Managerial accountants:a.
MEASURING AND REPORT COSTS
of production, marketing,and other functions. b.
PREPARING BUDGETS
.c.Checking whether or not units are
STAYING WITHIN THEIR BUDGETS.
 
d.DESIGNING STRATEGIES TO MINIMIZE TAXES.

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