Cost Accounting:

Foundations and Evolutions, 8e

Kinney ● Raeburn
CORE QUESTIONS

What is financial
accounting?
Cost Accounting:
Foundations and Evolutions, 8e
Kinney ● Raeburn
CORE QUESTIONS

What is its value

for me?
Cost Accounting:
Foundations and Evolutions, 8e
Kinney ● Raeburn
 Learning objectives:
 Understand how accounting relates to real business
world;

 Define financial accounting and understand its

relationship to economic decision-making.

 Identify the main users of financial accounting

Cost Accounting:
information and explain how they use this information.
Foundations and Evolutions, 8e
Kinney ● Raeburn
 Describe the major forms of business organization and
explain the key distinctions between them.
 ACCOUNTING
is the process by which information on the
transactions of an organisation is captured,
analysed, and used to report to decision makers
outside of the organization’s management team.

Cost Accounting:
Foundations and Evolutions, 8e
Financial accounting is sometimes referred to as
external financial reporting due to its focus on
Kinney ● Raeburn

providing accounting information to external

decision makers.
 ACCOUNTING
These external decision makers are often
referred to as financial statement users and
include the owners (normally referred to as
investors) and those who have lent money to the
organisation (normally referred to as creditors).
Cost Accounting:
Foundations and Evolutions, 8e
The primary purpose of financial accounting information
is to aid these users
Kinney in their economic decision-making
● Raeburn
relative to the organization.
 Accounting Equation

Liabilities
Assets = +
Cost Accounting: Capital/Equity
Foundations and Evolutions, 8e
Kinney ● Raeburn
 Account Titles
•  are the names given to the various
categories used to keep track of a
businesses transactions.
Cost Accounting:
Foundations and Evolutions, 8e
Kinney ● Raeburn
 Chart of Accounts

A list of all the account

titles used in an
organization’s
Cost Accounting:
business.
Foundations and Evolutions, 8e
Kinney ● Raeburn
 The rule of “Debit” and
“Credit”
• Debit = from Latin word debere (to owe);
translated as “Value Received”

Cost Accounting:
• Credit =Foundations
from Latinand
wordEvolutions, 8e entrust);
 credere (to
translated
Kinney ● Raeburn as “Value Parted
With”
 This means that….

Debit is always equal

to Credit.
Cost Accounting:
Foundations and Evolutions, 8e
Kinney ● Raeburn
THE ACCOUNTING
CYCLE

Cost Accounting:
Foundations and Evolutions, 8e
Kinney ● Raeburn
2nd step

Journalising
Cost Accounting:
transactions
Foundations and Evolutions, 8e
Kinney ● Raeburn
Journalising -
Recording of business transactions in
a systematic manner and in the
order of their occurrence in the
book of original entry call JOURNAL
BOOK.
TYPES OF JOURNAL ENTRY
A. SIMPLE ENTRY
With one debit and one credit.

B. COMPOUND ENTRY
With 1 debit and 2 credits;
With 2 debits and 1 credit;
With 2 or more debits and credits;
HOW IS IT DONE?
Sample Transaction:

On January 24, 2019, Mr. Q

invested cash of P500,000.75
to start the Merchandising
business of “Q Mart”.
To Journalise:
To Journalise:
To Journalise:
To Journalise:
To Journalise:
To Journalise:
LET US DO
EXERCISES.