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ACCOUNTING BASISLECTURE 1
LEARNING OBJECTIVES
A ti A I f ti t• Accounting – An Information system• History of accounting
U f A ti I f ti• Users of Accounting Information• Role of accounting
T f ti• Types of accounting
Accountingg
- a process of identifying, di i i d recording, summarizing, and
reporting economic information to decision makersmakers.
3
ACCOUNTING –THE LANGUAGE OF BUSINESS
Accounting is the information system that...Accounting is the information system that...
measures business activities,
processes data into reports, and
communicates results to decision makers.communicates results to decision makers.4
The primary objective of The primary objective of accounting is to provide g puseful information for
d i i kdecision makers.
ACCOUNTING INFORMATION SYSTEM
INPU OUTPUProcess to: Analyze
T TRecordSummarizeReportReport
A HISTORY OF ACCOUNTING
Account records date back to theAccount records date back to the ancient civilizations of China, Babylonia, Greece, and Egypt.y gypThe 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 tScript, circa 2400 BC
by Mesopotamian y pBookkeeper
8
A HISTORY OF ACCOUNTING
Accounting developed further as a result of the g pinformation needs of merchants in the city-states of Italy during the 1400s.Th k L P i li th ti i d f i d fThe monk Luca Pacioli, a mathematician and friend of Leonardo da Vinci, published the first known description of double-entry bookkeeping in 1494.
9
A HISTORY OF ACCOUNTING
In the Industrial Revolution of the nineteenthIn 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
h h ll hreport to the owners how well the company was performing
10
HISTORY OF ACCOUNTING IN MONGOLIA
1911 . Governing by Bogd Khan1924 -1964.Memorial order1964-1990 . Journal order1993 . Law of “Accounting “.
ROLE OF ACCOUNTING
InformationControlManaging
fTypes of accounting
Financial accounting
Cost and management
Tax accountingaccounting g
accounting
DIFFERENCEDIFFERENCE
Financial accounting
Managementaccountingg g
Primary users External users Internal usersPurpose of Help Help managers pinformation
pinformation users make decision
p gplan and control business operationsdecision operations
Timing Information about past
Information about future p
performance performanceType of report Financial
t t tInternal reports
t g l t d b statementsregulated by GAAP
not regulated by GAAP
Users of Accounting InformationUsers of Accounting InformationUsers of Accounting InformationUsers of Accounting Information
investors• investorsdicreditors
regulatorsEXTERNAL USERS
• creditors• regulators• customers
customerscompetitors
• competitors
s
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Users of Accounting InformationUsers of Accounting InformationUsers of Accounting InformationUsers of Accounting Information
• investorsC di
EXTERNAL USERS
• Creditors• Regulators • Customers
owners• Ownersmanagersemployees
INTERNAL USERS • Managers• Employees
16
GAAP- Generally accepted accounting principlesy p g p pThe FASB currently sets accounting standards. IAS -40 standardsIFRS-8 standardsLaws in Mongolia in field of accounting:
Accounting lawAudit lawT lTax laws
Organizations That constitute the body of GAAP in g yMongolia.Ministry of FinanceMongolian Institute of Certified Public Accountants
FORMS OF BUSINESS ORGANIZATION
Sole proprietorshipp p pPartnershipCorporation
BUSINESS ACTIVITY
InvestinggFinancingOperating