LEONITA MEGA PRATIWI

43219010035
THE NEED FOR ACCOUNTING
Accounting information can be used to assess past financial performance of a company
and help predict its future performance. All kinds of organizations— government
agencies, nonprofit organizations, and others —rely on accounting to gauge their
progress.
The accounting process begins with a transaction. A transaction is any event that affects
the financial position of an organization and requires recording.
Accounting information can be used to assess past financial performance of a company
and help predict its future performance. All kinds of organizations— government
agencies, nonprofit organizations, and others —rely on accounting to gauge their
progress.
The accounting process begins with a transaction. A transaction is any event that
affects the financial position of an organization and requires recording.
 BALANCE SHEET
ASSETS = LIABILITIES + OWNER’S EQUITY

The balance sheet (also called

statement
of financial position or statement of
financial condition) is a snapshot of the
financial status of an organization at a
point in time.
The balance sheet has two sections :
assets and liabilities plus owners’
(stockholders’) equity.
Assets are economic resources
that are expected to benefit future
activities of the organization.
Liabilities are the entity’s
economic obligations to non-
owners.
Owners’ equity is the excess
of the assets over the liabilities.
 REVENUES AND EXPENSES
REVENUES
Revenues are increases in ownership
claims arising from the delivery of goods
or services.
Recognize revenue by formally recording
it in the accounting records during the
current period only after it meets two
tests:
The company must earn the revenues.
That is, it must deliver the goods or render
the services to customers.
The revenue must be realized or
realizable.
E XP E N S E S
Expenses are decreases in ownership claims
(stockholders’ equity) arising from
delivering goods or services or using up
assets.
Income (also called net income, profits, or
earnings), is the excess of revenues over
expenses. It increases stockholders’ equity.
An income statement summarizes revenues
and expenses. It measures an organization’s
performance by matching its revenue and its
expenses for a span of time, often a month, a
quarter, or a year
 ACCRUAL BASIS AND CASH
BASIS

The accrual basis of accounting recognizes revenues and expenses

when they occur regardless of when cash is received or disbursed.
The cash basis of accounting recognizes revenue and expense when
cash is received and disbursed.

The major deficiency of the cash basis of accounting is that it is

incomplete. It fails to match efforts and accomplishments in a
manner that properly measures economic performance and financial
position.
 AUDIT

An audit is an “examination” or in-

depth inspection of financial
statements and companies’” records
that is made in accordance with
generally accepted auditing
standards.

Auditing standards are approved by

the Public Company Accounting
Oversight Board (PCAOB) which
is a part of the Securities and
Exchange Commission (SEC), a
government agency that regulates
the financial markets in the U.S.
including financial reporting.
THANK YOU