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 The meaning & functions of Accounting  The difference between Accounting & Bookkeeping  The purpose of keeping Accounting records  The Accounting.

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Presentation on theme: " The meaning & functions of Accounting  The difference between Accounting & Bookkeeping  The purpose of keeping Accounting records  The Accounting."— Presentation transcript:

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2  The meaning & functions of Accounting  The difference between Accounting & Bookkeeping  The purpose of keeping Accounting records  The Accounting Cycle/Process  Identify the different users of Accounting information

3  Accounting is the language of business  It involves:  Recording transactions  Classifying transactions  Summarising transactions  Interpreting and analysing transactions

4 RecordingJournal Classifying Trial Balance Final Accounts Ledger Interpretation Summarising Day to day recording of transactions “T “shape accounts Verification of accuracy of accounts Preparation of reports Ratio Analysis

5  Bookkeeping involves the actual data recording  This is often computerized in organizations  Accounting is concerned with the use, analysis & interpretation of accounting records

6 Income Statement or Profit & Loss Account Revenue – Expenses = Income (or profit) Balance Sheet Asset – Liability = Owners Equity Cash flow statement $ Receipts - $ Payments = Changes in cash balance

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8  Profitability  Return on investment  Operational efficiency (day-to-day operation)  Ensure security of investment  Basic functions like planning, budgeting, decision-making and control purposes

9 EEarning capacity of the business SSolvency or financial strength of the business AAbility of the management DDecision to invest in a business

10  The borrower's capacity for repayment  Whether to grant a credit or advance money to a busines  The limits of advance, or credit limits for a customer

11  To discuss and arrange labour contracts  To be assured of steady employment  To determine the ability of the business to pay higher wages

12  To evaluate tax returns to calculate tax payable by the business  To check that the business is following the government rules and regulations

13  To know the effect of pricing on customers  To judge the ability of the firm to survive and honour it's product warranties

14  Profitability of the firm  Security of capital  Return on their investment (ROI)  Resources owned  Financial stability  Whether to increase of decrease their existing ownership in the firm

15  CapitalResources supplied by the owners to the business  AssetsResources owned by the business  LiabilitiesWhat the business owes for the assets supplied  PurchaseGoods bought by the business  SalesGoods sold by the business

16  Purchase return/Goods returned by the business to it's suppliers  Return outwards  Sales return/Goods returned to the business by it's customers  Return inwards  CreditorA person to whom the business has to pay for goods and services rendered.  DebtorA person from whom the business has to receive money for goods and services supplied.

17  Stock Unsold goods  ExpenseCost of operating the business  RevenueMoney received for goods and services supplied  ProfitRevenue minus expenses  LossExpense minus revenue

18  The Accounting Equation  Assets = Liabilities + Owner's Equity

19  Sole Trader  Features  This is a one-man show  Capital put in by the owner  Business is run by the proprietor  Profits and losses at the year end are taken over by the proprietor  Usually small retail establishments  Unlimited liability

20  Partnership  Features  Minimum 2 people, maximum 10 or 20, depending upon the type of partnership  Capital contributed by all partners  Every partner has a right to participate in the business  Each partner acts as the principal and agent of the firm  Profits or losses at the end of the year are shared in the agreed ratio  Usually professionals like doctors, lawyers, accountants, etc  Unlimited liability

21  Company  Features  Largest form of business organisation  Capital contributed by the public, who are joint owners of the company  Can be public or private  Separate legal entity  Registered under the company's act  Ownership and management is usually separate  No limit to the maximum amount of members  Accounts must be prepared and audited yearly under the company's act

22  Q & A


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