INTRODUCTION TO ACCOUNTING

Fra Luca Bartolomeo de Pacioli (sometimes Paccioli or Paciolo; c. 1447 –

19 June 1517) was an Italian mathematician, collaborator with Leonardo da
Vinci, a Franciscan friar, and an early contributor to the field now known as
accounting he is recognized today as the father of accounting. Pacioli early
concepts were more so Bookkeeping which deals with record-keeping and
is one only aspect of accounting,

Generally Accepted Accounting Principles

Financial accounting practice is governed by concepts and rules known as
generally accepted accounting principles (GAAP).Relevant Information
Affects the decision of its users. Financial accounting in governed by a set
of rules we call Generally Accepted Accounting Principles, or GAAP for
short. Generally accepted accounting principles identify three major
characteristics of information. First, the information must be relevant.
Relevant information impacts the decision of the informed user for financial
information. Second, the information must be reliable. Finally, the
information must be comparable. Comparability helps us compare financial
information from one period with that of the next period. Reliable
InformationIs trusted by users. Comparable Information Used in
comparisons across years & companies.
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The basic accounting equation states that assets are equal to liabilities plus
equity of a company. The equation makes sense because in a general way
it states that assets must be equal to the claims against those assets. If you
have an asset we can have two broad categories of claims against that
asset. First, we may have claims by creditors for liabilities. Finally, after all
creditor claims are satisfied, the residual owners, and stockholders, have a
claim on those assets

Liabilities + Equity=Assets
Resources owned or controlled by a company
AssetsCashAccounts ReceivableNotes ReceivableResources owned or
controlled by a companyVehiclesLandAssets may be viewed as resources
owned or controlled by a company. They include such items as cash,
accounts receivable (amounts owed to the company by customers), land,
building and equipment, and supplies.BuildingsStore SuppliesEquipment
LiabilitiesAccounts PayableNotes PayableCreditors’ claims on
assetsLiabilities represent the claims of creditors on the entity’s assets.
Liabilities include accounts payable (amounts we owe to creditors for
assets purchased on account), notes payable, taxes payable, and wages
payable (amounts we owe to our employees at the end of the accounting
period).Wages PayableTaxes Payable
The equities of an entity include investments by owners, contributed
capital, and payments to those owners (dividends). Retained earnings
represents all of the accumulated earnings of a corporation that have not
been distributed to shareholders.Dividends
The Six Guiding Principles of Accountants

Responsibilities
"In carrying out their responsibilities as professionals, members should
exercise sensitive professional and moral judgments in all their activities."

This principle directs accountants to work collaboratively with other

accountants to improve both the image and practices of accounting. Part of
that responsibility includes public education, helping both clients and the
general public understand the role, standards and limitations of accountants.

The Public Interest

"Members should accept the obligation to act in a way that will serve the
public interest, honor the public trust and demonstrate commitment to
professionalism."

Rather than advocating for one segment of what constitutes accounting's

public -- clients and employers, creditors, governments, investors, and the
business and financial community at large -- accountants must strive to
represent the collective well-being of all those parties. Bottom line: When the
overall public good is served by employing all of accounting's guiding
principles, the best interests of an accountant's client or employer get served
in the process.

Integrity
"To maintain and broaden public confidence, members should perform all
professional responsibilities with the highest sense of integrity."

It's easy enough to say accountants shouldn't stick phony numbers in a

balance sheet. More to the point, accountants also need to avoid even subtle
misrepresentations, including misstatements by omission or by ignoring
obtainable information, in carrying out their duties. An accountant should
never stop short of obtaining all sufficient data to provide a reasonable
foundation for his conclusions or recommendations.

Objectivity and Independence

"A member should maintain objectivity and be free of conflicts of interest in
discharging professional responsibilities. A member in public practice should
be independent in fact and appearance when providing auditing and other
attestation services."

Independence governs an accountant's ability to work with integrity and

objectivity. Independence also is highly subjective. Although an accountant
may demonstrate independence in appearance, acting independently in fact
requires an accountant to be free of even potential conflict, both in action
and in mental attitude, a particularly immeasurable standard. The institute
suggests a pragmatic approach in dealing with independence, allowing an
accountant to footnote a job report disclosing possible -- even potentially
implied -- lapses in independence.

Due Care
"A member should observe the profession's technical and ethical standards,
strive continually to improve competence and the quality of services, and
discharge professional responsibility to the best of the member's ability."

This principle exhorts accountants to regularly pursue continuing education,

especially regarding generally accepted practices in the profession. It also
expands the definition of responsible and ethical work to include offering
service only in the accountant's area of competence and within her level of
expertise.

Scope and Nature of Services

"A member in public practice should observe the Principles of the Code of
Professional Conduct in determining the scope and nature of services to be
provided."

To forestall problems arising during the performance of a job, this principle

encourages accountants to accept jobs only from clients willing to work
within the technical, ethical and professional standards included in the
guiding principles.