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ACCOUNTING BASIS LECTURE 1


LEARNING OBJECTIVES • Accounting A ti – An A IInformation f ti system t • History of accounting • Users U off A Accounting ti I f Information ti • Role of accounting • Types T off accounting ti


Accounting g - a process of identifying, recording, di summarizing, i i and d reporting economic information to decision makers. makers 3


ACCOUNTING – THE LANGUAGE OF BUSINESS

Accounting is the information system that... measures business activities, processes data into reports, and communicates results to decision makers. 4


The primary objective of accounting g is to p provide useful information for d i i makers. decision k


ACCOUNTING INFORMATION SYSTEM

INPU T

Process to: Analyze Record Summarize Report

OUTPU T


A HISTORY OF ACCOUNTING |Account

records date back to the ancient civilizations of China, Babylonia, y Greece, and Egypt. gyp |The rulers of these civilizations used accounting to keep track of the cost of labour and materials used in building structures like the great pyramids. 7


Accounts Table with Cuneiform S i t Script, circa 2400 BC by y Mesopotamian p Bookkeeper

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A HISTORY OF ACCOUNTING Accountingg developed p further as a result of the information needs of merchants in the city-states of Italy during the 1400s. | The Th monkk Luca L Pacioli, P i li a mathematician th ti i andd friend f i d off Leonardo da Vinci, published the first known description of double-entry bookkeeping in 1494. |

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A HISTORY OF ACCOUNTING | In

the Industrial Revolution of the nineteenth century, the growth of corporations spurred the development of accounting. | The corporation owners—the shareholders— were no longer necessarily the managers of their business. | Managers had to create accounting systems to report to the h owners how h well ll the h company was performing 10


HISTORY OF ACCOUNTING IN MONGOLIA 1911 . Governing by Bogd Khan 1924 -1964.Memorial order 1964-1990 . Journal order 1993 . Law of “Accounting “.


ROLE OF ACCOUNTING Information | Control | Managing |


Types off accounting

Financial accounting

Cost and g management accounting

Tax accounting


DIFFERENCE Financial accounting g

Management accounting g

Primary users

External users

Internal users

Purpose p of information

Help p information users make decision Information about p past performance Financial statements t t t regulated by GAAP

Help p managers g plan and control business operations Information about future performance Internal reports nott regulated g l t d by b GAAP

Timing

Type of report


Users of Accounting Information • investors investors | • creditors creditors di | EXTERNAL USERS

• regulators | regulators • customers | • customers competitors

| competitor

s

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Users of Accounting Information

EXTERNAL USERS

INTERNAL USERS

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• • • •

investors C di Creditors Regulators Customers

• Owners | owners • Managers | managers • Employees | employees


GAAP- Generally y accepted p accounting gp principles p The FASB currently sets accounting standards. IAS -40 standards IFRS-8 standards Laws in Mongolia in field of accounting: ƒ Accounting law ƒ Audit law ƒ Tax T laws l


Organizations g That constitute the body y of GAAP in Mongolia. | Ministry of Finance | Mongolian Institute of Certified Public Accountants


FORMS OF BUSINESS ORGANIZATION Sole proprietorship p p p | Partnership | Corporation |


BUSINESS ACTIVITY Investing g | Financing | Operating |



Accounting basis lecture 1