FINANCIAL

ACCOUNTING AND
REPORTING

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What is Accounting?
▪ In 1941, The American Institute
of Certified Public Accountants
(AICPA) had defined accounting
as the art of recording,
classifying, and summarising in a
significant manner and in terms
of money, transactions and
events which are, in part at least,
of financial character, and
interpreting the results thereof'.
▪Accounting is a process of
identifying and measuring
quantitative financial
activities and
communicates these
financial reports to the
decision-makers.
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▪---American Accounting
Association
▪“Accounting may be defined as
the collection, compilation and
systematic recording of business
transactions in terms of money,
the preparation of financial
reports, the analysis and
interpretation of these reports
and the use of these reports for
the information and guidance of
management”
--A. W. Johnson
▪“Accounting is an information
system that identifies records
and communicates the economic
events of an organization to
interested users”
--Weygandt, Kieso, and Kimmel
Accounting Information
▪ It is the information that is collected
primarily numerical.

▪ This information is presented to various

people to help them make business
decisions.

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To account..
▪ To account for something means to
keep a record of something in your
business by using the accounting
system.

An accountant (or bookkeeper) collects

documentation and records this
information, categorizes it, and
presents it in specific formats.

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Financial Statements
▪ Accounting information is finally presented in
the form of financial statements – the key
reports of a business.

Bookkeepers
▪ Bookkeepers are involved in data collection
and entry.

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 Accountants
▪ Accountants prepare and
present financial statements
and fulfill an advisory or
consulting role.

▪ Accountants have even

become business strategists,
intimately involved in guiding
the operations of a business.

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Functions of Accounting
Recording
▪Is a process in which transactions are recorded in
the books of original entries. Example in journal
books.
Journal Books
▪Is sub-divided into subsidiary books according to
the number of transactions of particular
category.

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Classifying
▪Means transactions or entries of one nature are
grouped under one head of account.

▪The transactions recorded in ‘Journal’ or the

‘Subsidiary Books’ are classified or posted to the
‘Ledger Account’.

▪Ledger is the book that contains individual

account heads under which all financial
transactions of a similar nature are collected.
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Summarizing
▪Is presenting the classified data
in a from that is understandable
and useful to users of accounting
information.

▪It means preparation of Trial

Balance, leading to preparation of
financial statements example
trading and profit and loss
account, and balance sheet.
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Communicating

▪the accounting function is to

communicate the financial data to
the users.
Analysis and Interpretation
▪Means analyzing and then interpreting the
financial data.
▪To make a meaningful judgment of the
profitability and financial position of the
business.
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