ACC 115 Introduction (accounting in general)

Introduction – Accounting in General Forms of business and their distinct characteristics Nature, purpose and scope of financial accounting Accounting cycle and accounting records used in the recording, classifying and reporting process Users and use of of accounting information

Forms of business and their distinct characteristics 1.Sole proprietorship: Single owner Managed by the owner Usually in small size Enjoy no separate legal entity 2.Partnership: Formed by two or more partners Partnership Act 1961 Professional partnership: members Non-professional partnership: 2 – 20 members Enjoy no separate legal entity

3.Company: Companies Act 1965 Two major types: Public limited company Private limited company Limited liability

Nature, purpose and scope of financial accounting Accounting: –The art of recording, classifying and summarising of transactions and business events in monetary terms and interpreting the results so obtained. –Purpose: Decision making Bookkeeping: –Recording, classifying and summarising transactions –Bookkeeping is a field in accounting

Nature, purpose and scope of financial accounting The accounting cycle 1.Journalise transactions 2.Post transactions 3.Extract balances in accounts 4.Prepare Pre-adjustment trial balance 5.Recod adjusting entry 6.Post adjusting entry 7.Extract balances in accounts 8.Prepare Post-adjustment trial balance 9.Journalise closing entry 10.Post closing entry 11. Balance off the accounts 12.Prepare financial statements

The source documents Source documents: –Origins of transactions –Documents prepared (physically or electronically) to evident that a transaction has taken place. –Examples: Invoices Receipts Cheques Payment vouchers Purchase orders Sales orders

Users and use of of accounting information Users: –Owners –Managers –Creditors –Investors –Employees –Government –public

Tutorials Textbook: –Question 3 –Question 6 –Question 9 –Question 10