1. DEFINITION

2. The American Accounting Association defines Accounting as follows:

3. It is the process of identifying, measuring and communicating economic information to permit judgements and decisions by users of the information.”

4. The key words in the above definition suggest the following points:

5. Accounting provides an economic information. describing the financial and economic activities of an organisation.

6. The Accounting information needs to be identified and measured. This is done through a system of accounting that identifies and records "accounting transactions".

7. The "measurement" of accounting information involves making judgements about the value of assets and liabilities. and measuring the degree of profit or loss.

8. There are several forms of accounting communication (e.g) annual report accounts management accounting reports.

9. Accounting information is communicated using "financial statements"

10. OBJECTIVES OF FINANCIAL STATEMENTS There are two main purposes of financial statements: (1) A report on the financial position of an entity (e.g. a business, an organisation) (2) An identification of an organization financial performance over a particular period of time. (an "accounting period").

11. ACCOUNTABILITY Organisations are accountable for their actions and activities. They produce reports on their activities reflecting their objectives and the people to whom they are accountable

12. EXAMPLES OF ACCOUNTABILITY ORGANIZATIONOBJECTIVESACCOUNTAABLE Private or public company Making of profit Creation of wealth Shareholders Other stakeholders (e.g. employees, customers, suppliers) Local Authorities Provision of local services Optimal allocation of spending budget Local electorate Government departments Public services (e.g. transport, health) Provision of public service (often required by law) High quality and reliability of services Government ministers Consumers

13. All the above organizations require systems of financial management That enable them to produce accounting information.

14. THE ACCOUNTING INFORMATION HELPS BUSINESS IN DIFERENT WAYS.

15. It enables investors to evaluate an organization and make decisions. It also provides the business with: records of assets owned, amounts owed to others and monies invested. reports showing the financial position of an organisation and the profitability of its operations. a way of measuring an organisation's effectiveness. a way to monitor an organisations activities and performance.

16. USERS OF ACCOUNTING INFORMATION Shareholders lenders Customers Suppliers Government Employees Society.

17. There are two broad types of accounting information (1) Financial Accounts: geared toward external users of accounting information (2) Management Accounts: aimed more at internal users of accounting information

18. FINANCIAL MANAGEMNT OF ACCOUNTING INFORMATION COLLECTION OF DATA CLASSIFICATION OF DATA SUMMARIZING DATA INTERPRETING & COMMUNICATING DATA FORECASTING & PLANNING

19. The purpose of financial accounting statements is to show the financial position of a business and how it has performed over a specific period.

20. The three main financial accounting statements that help achieve this aim are:

21. (1) The profit and loss account for the reporting period (2) A balance sheet for the business at the end of the reporting period (3) A cash flow statement for the reporting period