Summary of Lecture: Introduction To Accounting and Economics

Topic 1 - Introduction Introduction to Accounting and Economics
Introduction to Accounting
and Economics
Topic 1: Introduction
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Summary of Lecture
The structure of the rest of this Topic is as follows:
• Words you must know
• An outline of the business environment
• What does an economist do?
• What does an accountant do?
• The structure of the course
• How you will be assessed
• Effective study skills
• Review of the topic
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Introduction
Welcome to the Accounting and Economics course,
the purpose of this topic is to introduce you to the
course. This lecture will cover:
- An outline of the business environment
- Differences between approaches adopted by economists
and accountants and the kind of problems they deal with
- The structure and content of the module and how you will
be assessed
- Suggestions for organising your study time to the
maximum effect.
Words You Must Know

Economics: the study of how society decides when,
what and how to produce (Begg, 2009, p.2)
• Microeconomics – study of markets
• Macroeconomics – study of the economy as a whole
Accounting: the classification, recording and
interpretation of monetary transactions and other data
• Financial accounting – monetary transactions, for internal
and external use
• Management accounting – monetary transactions and other
data in support of management control and decision-making

An Outline of the Business

Environment
• This module is about individuals and businesses
that operate in a modern free market economy
• This implies an environment where there is an

efficient legal system that can be used to resolve
disputes and protect individuals and firms from
unlawful behaviour
• In this environment, businesses are free to make

and enforce contracts, subject to the norms of the
society

Environment
What exactly do we mean by business? The
basic forms of business unit are as follows:
A Sole Trader:
• Simplest form of business unit
• An individual trading by him or herself
• Very few rules involved in setting up this kind of
business
• Tend to run very small businesses


Environment
A Partnership:
• More complex business unit where two or
more individuals work together
• Partnership agreement
• Can be much bigger than a sole trader
• Often used by professionals such as
lawyers, accountants and doctors

Environment
A Limited Company:
• Most complex form of business unit
• Legal entity distinct from the individuals
(shareholders) who own it
• A private limited company may be relatively small,
but a public limited company can be very large and
can raise money by selling shares to the public


Environment
What is a large business?
• Difficult to precisely define the size of a
business
• Factors to consider:
- The annual sales of the business
- The number of people employed by the
business
- The value of the assets owned by the business
What does an Economist do?

• They study economics
• Economists deliberately simplify reality
• They use models of the real world that

focus on the essentials but leave out some
of the confusing detail


• For example, an economist may want to study the market for
public transport e.g. a city’s bus network
• The economist chooses to look at one aspect of the bus

network – the relationship between the price of individual
tickets and the total revenue of the bus company
• May estimate an average price for tickets or to assume a

standard flat rate fare
• The economist goes out and collects some data and then
presents an analysis of the results

• The analysis could look like this:
Bus Fare and Total Revenue of the Bus Company
Total
Revenue
Ticket Price


• No numbers on either of the axes of the
graph, the economist is looking at causal
relationships without necessarily seeking to
quantify them
• The economist is looking at the essential

point that is that total revenue increases as
the price of tickets rises

• The economist has just established a
relationship between two variables
• Other factors can then be brought into the

analysis, for example, changes in the
income of the bus passengers or the effects
of traffic congestion

What does an Accountant do?

• An accountant would look at the bus company in
an entirely different way
• Accountants prefer numbers to graphs – much

more detailed view
• For the bus company, a specified period would be

chosen – e.g. month of May of a specified year
What does an Accountant do?

• Measures revenue for the month of May
and then matches this to costs for May
• Works out if the bus company made a profit

during May

The Structure of the Course

• The course or module is divided into 12 topics,
each comprising three activities. There will be:
- A lecture session designed to give you an outline of the
topic area (2 hours per topic)
- A private study session where you will be required to
complete activities on your own (4 hours per topic)
- A tutorial session where you can complete activities
supervised by your teacher, get feedback on your
personal work, and ask questions (2.5 hours per topic)
• The following chart gives an outline of the course
topic / Topic Subject Coverage
1. Introduction Economists and accountants, effective study skills
2. Supply & demand Supply, demand, elasticity
3. Market structures Perfect competition, imperfect competition
4. National income and output National income & output, growth, the business cycle, aggregate
demand, fiscal policy
5. Money Interest rates, inflation, monetary policy
6. The international dimension Global economy, exchange rates, balance of payments
7. Intro to accounting Transactions, accounting conventions, financial statements
8. Bookkeeping Basic requirements, double entry, trial balance
9. period-end adjustments Accruals & prepayments, inventories, depreciation, bad & doubtful
debts
10. Preparing financial From trial balance, income statement, balance sheet
statements
11. Interpreting financial Vertical, horizontal & ratio analysis
statements
12. Revision & review Economics, accounting, exam preparation

How You Will Be Assessed

• The purpose of assessment is to find out how much you have
learned
• The primary assessment is via a 2 hour examination
• Lecturers will assess your progress throughout the module in
order to provide further help as required
• If you work through this course properly and complete the
tasks given to you by your teacher, you will pass the course
• However, It is just as important that you concentrate on
learning something from the course, rather than just seeking
to pass an exam
Effective Study Skills

• Organise yourself:
- Academic study is work and the most successful workers are

the most organised
- Productivity
- Prepare a study timetable for each week
- Your schedule should help you plan your commitments and

make sure you avoid working very hard at the last minute to
meet deadlines
- You should aim to work consistently during your time on the

course


• Set up a filing system:
- You have to take notes of lecture sessions and

of the books and articles that you read
- File these in a coherent way
- Use your notes to revise and deepen your

understanding

• Assessments/Private Study:
- Make sure you understand what is required of you
- Listen carefully to your teacher and read assessment

requirements/private study exercises carefully
- Do what you are asked to do and attempt to do everything

you are asked to do. Hand in work at the correct time
- Don’t try and negotiate with your teacher and don’t try
and make excuses!


• Examinations:
- Be well prepared
- Revise the main topic areas thoroughly
- Attempt practice papers: exam structure and

question type

- Highlight or underline key words in the questions and make sure
you cover these points in your answer
- Do the easiest questions first
- Clearly indicate which question or part of a question you are

answering
- Try and make your answer as easy to read as possible
- Use plenty of space on the paper. Take a new page for each
answer
- Write as neatly as possible
- Use your time wisely!

Review of the topic

An outline of the main ideas that have been
covered during this module
• A list of words you should know

• A brief explanation of business topics
• An explanation of the different approaches adopted
by accountants and economists
• Advice about organising your study time in order to
maximise your chances for success on the course
Questions for Students
1. What are you looking for from this

module?
2. Does this first topic suggest the
module will meet your requirements?
DISCUSS!

Topic 1
Any questions?

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Topic 1 - Introduction Introduction to Accounting and Economics

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Introduction Topic 1 - 1.‹#›

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Introduction Topic 1 - 1.‹#›

Words You Must Know

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V2.0 Visuals Handout – Page 2

Introduction Topic 1 - 1.‹#›

An Outline of the Business

• This implies an environment where there is an

• In this environment, businesses are free to make

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Introduction Topic 1 - 1.‹#›

An Outline of the Business

V2.0 © NCC Education Limited

V2.0 Visuals Handout – Page 3

Introduction Topic 1 - 1.‹#›

An Outline of the Business

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Introduction Topic 1 - 1.‹#›

An Outline of the Business

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V2.0 Visuals Handout – Page 4

Introduction Topic 1 - 1.‹#›

An Outline of the Business

V2.0 © NCC Education Limited

Introduction Topic 1 - 1.‹#›

What does an Economist do?

• Economists deliberately simplify reality

• They use models of the real world that

V2.0 © NCC Education Limited

V2.0 Visuals Handout – Page 5

Introduction Topic 1 - 1.‹#›

What does an Economist do?

• The economist chooses to look at one aspect of the bus

• May estimate an average price for tickets or to assume a

V2.0 © NCC Education Limited

Introduction Topic 1 - 1.‹#›

What does an Economist do?

Bus Fare and Total Revenue of the Bus Company

V2.0 © NCC Education Limited

V2.0 Visuals Handout – Page 6

Introduction Topic 1 - 1.‹#›

What does an Economist do?

• The economist is looking at the essential

V2.0 © NCC Education Limited

Introduction Topic 1 - 1.‹#›

What does an Economist do?

• Other factors can then be brought into the

V2.0 © NCC Education Limited

V2.0 Visuals Handout – Page 7

Introduction Topic 1 - 1.‹#›

What does an Accountant do?

• Accountants prefer numbers to graphs – much

• For the bus company, a specified period would be

V2.0 © NCC Education Limited

Introduction Topic 1 - 1.‹#›

What does an Accountant do?

• Works out if the bus company made a profit