Analyse financial statements by use of ratios and statement of cash flows. Financial Accounting 1. For the investors they are interested with the profitability of the firm to know that they are earning the required return. As an example, transaction (1) would be shown as follows: Transaction      Total                Liabilities        Owner’s Equity, (1)                          +                        +                      NC. Business Transactions The accounting information also helps the investors to decide where to invest their scarce resources. To ensure the created accounting information is in a form which will be useful to the users of the information, we summarize the classified information into financial reports, called financial statements. Prepare a balance sheet for the business entity Johnsstone& Sons CPA at September 9,2001. Effect Full payment was made on this date. When balance sheet equality is expressed in equation form, the resulting equation is called the balance sheet equation. This is the analysis classification and recording of financial transactions in books of Account. - A balance sheet lists what a business owns and owes. Accounting Principles: International Accounting Standards (only outlines); Accounting principles; Accounting Standards in India. - It shows assets and how they are nanced. 1. a) Beta Company has total assets of $256,000 and the owner’s equity amounts to $64,000. For this reason therefore the current market value of the assets are of little importance to  decision makers. Since a language is a man-made means of communication , it is natural that languages should change to meet the changing needs of society. This unit is also referred to as Fundamentals of Accounting 1, foundations of accounting or introduction to Financial Accounting .The objectives of this course is: To equip a student with the principles and concepts of preparing and keeping financial records. Creditors who provide loans to the business. 2. Statement summarizing cash receipts and payments of the business over the same period covered by the income statements. .The assets of Joytech Company amounted to $96,000 on December 31 of year 1, but c) increased to $136,000 by December 31 of Year 2. Tax Services To be useful, accounting data must be expressed in terms of a common denominator. Total cost was $290,000 of which $50,000 was paid from the business bank account as a cash down payment. 60,000 under the name of the business. They are also referred to as financial statements. -Computation of cost of goods sold each period, -Amortization of cost of unexpired insurance policy. You must compute  the amount for Shah Daily,capital. 10. This should be based on cost-effectiveness e.g. Explain briefly clearly the concept of business entity giving appropriate examples. Accounting 1A Class Notes Chapter 1 – Introduction to Accounting and Business Page 6 S. Aviles Financial Statements • After transactions have been recorded and summarized, reports are prepared for users. Accounting information is useful to the following groups of people. Book Keeping The equity of the owner is the residual claim because the claim of the creditors usually comes first. Under this principle or assumption changes in the purchasing power of money are ignored. Effectively communicating this information is key to the success of every business. This was very fortunate purchase. It should be noted that not all business events can be measured and described in monetary terms. Sept 14 Purchased office equipment on credit for 5,400/=, Sept 20 Received 1500/= as partial collection of the 6000/= account receivable Sept 30 Paid 3000/= on the accounts payable, In the table below, each transaction is identified by date; its effect on the accounting equation and also the new balance of each item are shown. For each of the transactions (a)through (e) you are to write a separate sentence explaining the nature of the transaction. Owner withdrew cash from the business……………. Increase one asset, decrease another asset, and increase a liability. 1) The business or Accounting entity concept Jane Invested Kshs. (divide the total cost between land and office building. Although this is recognised by accountants its ignored. Accounts payable as a liability. Purchased a motor van at a price of $7,000 terms $1,000 cash and the balance to be paid in 30 equal monthly installments. They are measured by the amount of cash or other assets received. Introduction: Accounting Principles and Practices; GAAP - Generally Accepted Accounting Principles; Account Types; The Basic Accounting Equation; Financial Statements; Accounting in the Headlines; Glossary: Lesson 2; Exercises: Unit 2; Unit 3: The Accounting Cycle. Financial Accounting is a specialized branch of accounting that keeps track of a company’s financial transactions. Losses from unprofitable operations of the business. KNEC| KASNEB| KISM| Study notes and Revision materials for schools in Kenya. They aslo commonly engage CPAs to conduct additional investigations for the purpose of determining ways in which their operations may be improved . Assets                                                  Liabilities & Owner’s Equity Cash                 24000              Liabilities, A/C Rec. Furnishing governmental services is a vast and complicated operation in which accounting is just as indispensable as in business. Name two examples of such happenings which may not be measured satisfactorily be recorded in books of account. Public at large – financial analyst / economist / labour union / potential investors. It is important therefore, to remember that the amount reported in financial statements do not show the amount that would be received if the assets were sold but the costs of the assets on the date that they were acquired. Although revenue often consist of cash, it may consist of any asset received such as customers promise to pay in the future (an account receivable) or the receipt of property from a customer. The shareholders who provide capital and carries the risk of the firm /business. Sept 20: Cash of Kshs. What factors determine the development of these principles. Performed services for credit customer for Kshs7,000 Jan 30 Paid the Accounts payable to furniture Ltd. in full. 14th Sept purchased office furniture and equipment on credit form general equipment inc. for 5,400 – new asset and incurrence of liabilities. Here are Some famous Books and their Authors have a look! The origin of accounting … The need for periodic reporting is one of the most challenging problems of accountants . Certain transactions of Kresty Company are listed below. Each of the times labeled Balances contains the same items as the balance sheet previously illustrated for the particular date. The Balance Sheet and the Recording of Transactions ( PDF) 3. List the following four column headings on a sheet of paper as follows: Transaction Total assets Liabilities                          Owner’s Equity. Land                            89,200             Office Equipment                    26,240, Building                      24,000               Cash                                      10,008. The items to be included in the balance sheet of Mwanzo Estate Ltd as at September 30, 2000 are listed below in random order. Such investigations and the suggestions growing from them are known as management advisory services. T.S, Grewal, Introduction to Accounting, S. Chand and Co., New Delhi. In addition to an annual audit by an independent firm of CPAs , many companies maintain a staff of internal auditors, who constantly check the records prepared and maintained in each department or company branch. Banks, investors, and others rely  on the information in a company’s financial statements in making loans, in granting credit, and buying and selling securities. 4. -Dollar / shilling effect in the changes of these accounting methods during the current period. Cancellation of liabilities requires either an outlay of assets (generally cash), or the performance of future services. Sold equipment for cash at a price above its cost. Users of accounting information should be given the most objective factual data available. Overview of the course, Administrative matters, Discussion of Accounting Framework ( PDF) 2. Total assets were increased by 21,000 and total liabilities and owners equity was also increased by 21000/=as a result of recording 21000/=. Interpretation and analysis are not the sole province of the accountant. In this day of increasing complexity in income and other tax laws and continued high tax rates, few important business decisions are made without consideration being given to their tax effect. Performed services and was paid cash amounting to Kshs5,000/=. Applying Basic Accounting Equation. After several years of experience with a practicing firm of certified public accountants, Jostone resigned from his position on September 1, 2001, in order to begin a public accounting practice of his own, named Jostone $ Sons. In case of changes full disclosure principle should be applied. What are the similarities and differences between internal and external audits? A large business, on the other hand, may have more than a hundred employees in its accounting department. This may be demonstrated with the transactions below: Assume that Robert started a business under the name Robert Real Estate Company and deposited Kshs. They may be tangible assets e.g land, building and equipment or intangible assets e.g legal right such as accounts receivable, patent rights or rights to use leased assets). What is the  amount  of  the liabilities? This increases the usefulness of the statements and makes them less  subjective to misinterpretation. May not qualify as an accounting principle but implies that Accountant must be conservative in their estimates and opinions. –     Immediate payment of 15000/= and payment of the Balance of 21,000/= within 90 days. State three such decisions made by: Investment of cash in the business by the owner. (adsbygoogle = window.adsbygoogle || []).push({}); Book-keeping means the recording or of transactions , the record making phase of accounting. Clearly state the main functions of a public and private accountants. Increase cash and decrease  A/C receivable . tools waste paper basket etc-deferred benefits or future benefits but expensed in the period of purchase. If the consideration given is something other than cash, cost is measured by the fair (market) value of what is given or the fair value of the asset or service received whichever is more clearly evident. Financial Accounting Notes PDF: In MBA Post Graduation Degree, students will cover all core subjects like finance, accounting, management, marketing, human resources, operations, and statistics to set the career in the right path.But for an easy understanding of the concepts, you require the best resources with you at your preparation. In the above article, a student can download financial accounting bcom 1st year and financial accounting for bba 1st year. General accounting has to do primarily with recording transactions, processing the recorded data, and preparing financial and other reports for the use of management, owners, creditors, and governmental agencies. In addition to auditing , accountants commonly offer management advisory services. Prudence concept means that the figure taken should understate profits rather than overstating the profits. Sale of an asset In other words anticipate loss but not profit. Prepare basic financial statements of sole traders. Prepare a balance sheet include a figure for the total liabilities and owners equity. Advanced Accounts. Two ways: Accounting Equation (Balance Sheet Equation). Paid a liability of the business……………………….. Effects of transactions on the Accounting Equation. 35,000/= from Furniture Ltd. paid Kshs 20,000/= cash and the balance to be paid within 30 days. We will explore the layout of the balance sheet, income statement, and cash flow statement; and demonstrate how to prepare financial … She decided to put in practice the skills acquire during the four-year programme. Process of identifying, Resources of a business are recorded initially at their cost under the cost principle. Used a personal check to pay for the supplies. Accounting and double-entry bookkeeping; financial and managerial accounting; basic financial statements (income statement, statement of cash flows, statement of changes in owners' equity and balance sheet); permanent (real) and temporary (nominal) accounts; four types of accounting transactions. Vol.-I. Financial Accounting subject is included in B.COM and BBA, so students can able to download financial accounting bcom 1st year and financial accounting for bba. 5. Financial accounting (BCA 306) Uploaded by. An income statement is prepared by listing the revenues earned during a period of time, listing the expenses incurred in earning the revenues, and substracting the expenses from the revenues to determine if a net income or a net loss was incurred. Expenses Come on! Course. 1.1 INTRODUCTION Accounting has rightly been termed as the language of the business. Learn how to compile and analyze financial statements, determine the value of a firm, and evaluate a business and its competitors. Planning business activities before they occur is called budgeting. Management Accounting involves the development and interpretation of accounting information which is intended to aid management is running the business. In some cases cash may be paid out before the expense is incurred as for example payment for next years rent. Management advisory services include the design, installation, and improvement of a client’s general accounting system and any related information system it may have for determining and controlling costs. Purchased office furniture on credit………………. This means that the underlying purpose of Accounting is to provide financial information about an economic entity (business enterprise 11) Disclosure Principle Definition of terms used in Financial Accounting: Arrange the assets in the sequence. 9. The list of assets show what resources the business own and the liabilities and owner’s equity shows who/what supplied them (and how much each group supplied). A net income is earned when revenues exceed expenses, but a net loss is incurred if the expenses exceed the revenues. Now we shall describe or explain each of the major components. Banks  commonly require an audit of the financial statements of a company applying for a suitable loan, with the audit being performed by a CPA who is not an employee of the audited concern but an independent professional person working for a fee. b) The balance sheet of Border Inc. shows  that the owner’s  equity is  $192,000:  It  is equal to two-third the amount to total assets. Each balance sheet should reflect all transactions completed to date. Jostone signed a note payable for the balance calling for payment in three years or less. P.C. Then indicate the effect of each transactions on the total assets liabilities and owner’s equity by placing a plus sign (+) for an increase a minus sign (-) for a decrease or the letters (NC) for no change in the appropriate column. Introduction to Financial Accounting notes- Revised and Updated Syllabus. KNEC certificate courses, Diplomas, Higher Diplomas, KISM courses cpsp-k and aps-k, KASNEB cpa, atd, cs, cifa, ccp, dcm, cict and cict, Ksce and Kcpe, This lesson introduces you to Accounting showing clearly the broad accounting systems and the underlying accounting principles. The type of financial statement most generally prepared are:-. Sept 1 Started a business by depositing Ksh. Sept 6: Johnstone purchased a dirt track motorcycle which he planned to  use  on weekend trips. Notes of operating system. Financial accounting study material includes financial accounting notes, financial accounting book, courses, case study, syllabus, question paper, MCQ, questions and answers and available in financial accounting pdf form. Describe the following types of Audits: Statutory Audits;, Internal Audits;, Private Audits and Management Audits; In addition to shareholders, many different parties are interested in the audited accounts of a company. These are the economic activities of a business. Below is specimen of an income statement showing the components. Geektonight is a vision to provide free and easy education to anyone on the Internet who wants to learn about marketing, business and technology etc. financial accounting and management unit introduction to accounting book keeping it is the art of recording the business transactions in set of books. Financial Accounting study material includes financial accounting notes, financial accounting books, financial accounting syllabus, financial accounting question paper, financial accounting case study, financial accounting questions and answers, financial accounting mcq, financial accounting courses in financial accounting pdf form. Purchased a van for Kshs. It shows whether or not the business achieved or failed to achieve its primary objective i.e earning a ‘profit’ or net income. Adequate disclosure means that all material and relevant facts concerning financial position and the results of operation are communicated to the users. Monga, J.R., Financial Accounting: Concepts and Applications, Mayoor Paper Backs, New Delhi. Briefly explain the purpose of accounting. Increase an asset and increase owner’s equity. liabili es. Discuss the need of generally accepted accounting principles. S. N. Maheshwari, Financial Accounting, Vikas Publication, New Delhi. Share on Facebook Share. The accounting information (mostly financial accounting) is used as a base for tax returns. accounting reports providing this information are called financial statements (adsbygoogle = window.adsbygoogle || []).push({}); During this same period, liabilities increased by $20,000. Regardless of type of asset, it represents revenue. Download Financial Accounting Notes PDF 2021 for MBA. Liabilities are debts owed by a business to outside parties (called creditors). 2. The phase of accounting that has to do with collecting, determining and controlling costs, particularly costs of producing a given product or service, is called cost accounting. The owner’s equity at December 31 of Year 1 amounted to $66,000. Other types of revenue are –  interest, dividends, received on shares owned and rent received. On the first column identify each of the following transactions by number. Send email Mail. Received in exchange another model chair priced at $ 185 and a cash refund of $25. Accounting is the process of recording, summarizing, analyzing, and interpreting financial (money-related) activities to permit individuals and organizations to make informed judgments and decisions. They may be immediate cash payment such as wages and salaries or promise to pay cash in the future for services received such as advertising. This can be done in such as Auditing, Management Advisory services and tax services. Financial accounting is primarily concerned with the preparation of financial statements whereas management accounting covers areas such as interpretation of financial statements, cost accounting, etc. He or she will also supervise the clerical or data processing staff in recording the transactions and preparing the reports. Unfortunately this is not, realistic when the general purchasing power of a shilling / dollar changes the value of money declines. Cost  is determined by the exchange price agreed upon by the parties and is measured by the amount of cash to be given in exchange for resources received. Clients expect these suggestions as a useful audit by-product. The above group of people use accounting information to make financial / economic decisions about the firm which includes. Introduction to Accounting class 11 Notes Accountancy According to American Institute of Certified Public Accountants, “Accounting is the art of recording, classifying and summarising in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof.” 1. To equip students with techniques to enable them prepare and interpret financial information. ), Sept 3: Purchased office equipment for cash $5,200. The assets liabilities and activities of the business are kept completely separate from those of the owner of the business and from those of other businesses. Accounts must ensure that all material items are properly reported  in the financial statements. Accountants classify these transactions into two types: External transactions: (often called exchange transactions) are those involving economic events between two or more independent firms. Financial statements are prepared on the assumption that the existing business will continue to operate into the future. This means Accounting includes the design of accounting systems, preparation of financial statements, audits, studies , development of forecasts, income tax work, computer applications to accounting processes, and the analysis and interpretation of accounting information as an aid to making business decisions. 4. At the end of the lesson you should be able to:-. Increase an asset and increase a liability. The. Under the accounting entity concept the business is considered a separate entity distinguishable from its owners and from all other entities. Introduction to Accounting. In making the audit, the auditor carefully examines the company’s statements and the accounting records from which they were prepared. View Notes - Introduction to Financial Accounting Notes from ACCT 1501 at University of New South Wales. We can use this language to communicate financial transactions and their results. When this is the case the statement should identity clearly the basis upon which the values are determined. An answer is provided for the first transaction to serve as an example. Owners equity Or Accounting has been referred to as the process of identifying, measuring and communicating economic information to permit informed judgement and decisions by the users of information. The body of the Balance Sheet consist of: Assets 200,000 paid a deposit of Kshs 50,000/= and signed 1 year notes payable for the balance. This involves the preparation of financial statements available for public use. Purchased a motor vehicle truck for cash………………. Unit 2: Accounting Principles and Practices. What was the amount of owner’s equity at December 31 of Year 2? They should base their estimates on sound logic and select those accounting methods which either overstate nor under state the facts. EFFECTS OF TRANSACTIONS ON THE ACCOUNTING EQUATION. The Income Statement and Principles of Accrual Accounting (cont.) Accounting is a tree while financial accounting is one of its branches. Account for assets and liabilities. INTRODUCTION TO ACCOUNTING. For the government it has to regulate the activities of the business to be in line with the over all objective of the government. Note more often than not this information is reorganized or adjusted to confirm with income tax reporting requirements. Hence its merely concerned in making records of business transactions. Revenue should be recognized at the time goods are sold or services are rendered. A cash 50%  down payment was made with payment of the balance to be made within 60days. MBA financial accounting study material includes financial accounting notes, financial accounting book, courses, case study, MCQ, syllabus, question paper, questions and answers and available in financial accounting pdf notes form. If the transactions of a business are to be recorded, classified and summarized into financial statements the accountants must be able to identify clearly the boundaries of the unit being accounted for. (adsbygoogle = window.adsbygoogle || []).push({}); 7. These financial statements are concise, perhaps only three or four pages for a large business. Sept 2: Purchased land with a small office building suitable for his accounting practice. 2) The going – concern assumption / continuity principle. Sold equipment on credit for a price equal to its cost. This equality may be expressed in equation form for a single proprietorship business as follows: Assets = Liabilities + Owner’s equity To keep books is to record transactions, and a bookkeeper is one who records transactions either manually with pen and ink or with a book keeping machine. The objective of budgeting is to provide management with an intelligent plan for failure operations. Jan 3. Definition of Accounting. The Accounting Notes from the chapter allows students to grasp difficult concepts such as recording of financial and economic events, analysis of events to understand its classification, etc. Assets                                                              Owner’s equity, Cash……………60,000                                        Robert,capital………….. 60,000, 3rd Sep. purchase of land           –           Kshs21,000, Purchase of an asset and incurring of liability. An accountant gains from an audit an intimate knowledge of the audited company’s accounting procedures and its financial position. This assists the users of accounting information who need reasonably current and comparable information-relating to prior accounting periods. Cost of the resources acquired is determined objectively on the basis of the exchange price negotiated by the independent parties to the exchange. 13)Prudence III SEM BCA Notes ON Introduction TO Accounting. 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