Professional Documents
Culture Documents
CHAPTER ONE
INTRODUCTION TO FINANCIAL
ACCOUNTING
Definition of accounting
Accounting information
What is information?
Financial Accounting
• It describes financial resources, obligations and activities of an economic activities
• it helps investors and creditors to make decisions
• it also helps managers and others
• in fact it is used for many purposes “general purpose”.
Managerial Accounting
• It involves the development and interpretation of accounting information intended to
assist management in operating the business.
• it helps to set overall goals, to evaluate performance, to decide to introduce new line
of product, etc
Tax Accounting
• Financial accounting information is a base to prepare tax return
• This information, however is adjusted or reorganized in line with the income tax reporting
requirements
1) Income Statement
e s s Inputs Process Outputs
1)
2)
Income Statement
Balance Sheet
s i n o n 2) Balance Sheet
Bu nsacti
3) Cash Flow
3) Cash Flow
Tra
1.1. Accounts
Accounts
2. Journal
2. Journal
3. General
3. General
Ledger
Ledger
4.4. Trial
TrialBalance
Balance
Financial
Statements
Fin
anc
ial Rep
orti
n g
Based
Basedonon Historical
Historicalin
in
General
General Purpose
Purpose Nature
Nature
Assumption
Assumption
Results
Resultsfrom
fromInexact
Inexactand
and
Approximate
ApproximateMeasures
Measures
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002
Management Accounting Information
• Management accounting is the preparation &
use of accounting information systems to
achieve the organization's objectives by
supporting decision makers inside the
organization.