What

What is
is Accounting?
Accounting?

The purpose of accounting is to:

(1) identify,
identify record,
record and communicate the economic
events of an

(2) organization to

(3) interested users.

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 Who
Who Uses
Uses Accounting
Accounting Data
Data
Internal Users
Management IRS
Human Investors
Resources
There are two broad
groups of users of Labor
financial information: Unions
Finance
internal users and
external users. Creditors
Marketing
SEC
Customers External
Users
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 Assets
 Assets are property owned by an
individual or business to which money
value can be attached.

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 Liabilities
 Liabilities mean the amount owed by
the business to outsiders and to the
proprietors.

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 Capital

Capital is the amount invested by the

proprietor or partner in the business.

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 Accounting Equation
 Assets = Liabilities + Capital
 Every accounting transaction has an equal affect on
both sides of the equation.
 Purchase a Rs.20,000 car for cash.
 Increase asset car and decrease asset cash by
Rs.20,000. No net change to assets.
 Purchase a Rs.20,000 car on credit.
 Increase asset car and increase liabilities by
Rs.20,000.

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