Session 1

Importance and Definition of Accounting

Accounting is the process of identifying, measuring, recording,

summarizing, and communicating economic information to permit
informed judgments and decisions by the users of information.

Financial Versus Managerial/Cost Accounting

External users: Financial Accounting reports.

Internal users: Managerial (or Cost) Accounting reports
(Course: Strategic Profitability Management)

Users and Uses of Accounting Information

Outputs of financial accounting process: Financial statements. Name them.

Meaning of assets, liabilities, stockholders’ equity

Objectives of Financial Reporting

Users of
Business Entities Financial
Entities Information

1
Why do we need accounting standards? Who sets them? Do the tax
accounting rules and financial accounting rules have to be identical?

Accounting Equation: A = L + CC + RE
Assets = Liabilities + Contributed Capital + Retained Earnings

Rules of debit and credit

Increase in an asset is recorded as a debit (i.e. it is recorded on the left

hand side of a T-account

Next class:

Demonstration Problem on Accounting Mechanics

Steps in accounting cycle

Articulation of financial statements