The Need for Business Accounts

Ch 26
Accounts
Accounts of a business are a systematic way of recording the financial history of an
organization over a certain time period.
Accounting Records
The books or ledgers where regular entries are made from which the trial balances and
final accounts are prepared.
Accounting
Accounting is concerned with collecting, analyzing and communicating financial
information. .
 Main users of financial information (records) related to business

Owners

Suppliers Managers

Investment Government
Analysts Business
Record
Middlemen Employees

Community Banks
Representative Competitors
s

 Limitations of Published Accounts

Financial Accounting
It is art of recording, classifying and summarizing business transaction which is in
monetary terms, interpreting and communicating to stakeholders.
Management Accounting
Management accounting is the production and use of accounting information for internal
managerial purposes of analysis, planning, review and control rather than for historical
financial record. These are four functions of management accounting;
 Budgetary control
 Cost and profit centers
 Investment appraisal
 Breakeven analysis
Window Dressing
It means presenting the company accounts in such a manner that it shows good position
but in reality it is not. For example, a permanent decrease in the value of asset not
reflected in accounts as a loss.