What is Accounting i

8/3/2019 What is Accounting i

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Introduction To

Accounting

Introduction To

Accounting



22

OutlineOutline

The nature of firm;The nature of firm;

The value of accounting;The value of accounting;

The Evolution of The Evolution of accounting;accounting;

Accounting: A bird viewAccounting: A bird view



33

Opening StoryOpening Story

Everyone here is supposedEveryone here is supposedto know the Outlaws of theto know the Outlaws of theMarsh;Marsh;

Question I:Question I:Who plays the role of ³CFO´Who plays the role of ³CFO´

of the Marsh Mountain Liang?of the Marsh Mountain Liang?

There are two;There are two;



44


Some otherSome other

positions relatedpositions related

to accounting;to accounting;



55


Question II:Question II:

Why does the MarshWhy does the Marsh

Mountaion Liang needMountaion Liang need

such positions as CFO andsuch positions as CFO andChief Controller?Chief Controller?

We must know that theWe must know that the

title of SHUIHUZHUAN istitle of SHUIHUZHUAN is

also translated asalso translated as All Men All Men

are Brothers.are Brothers.



66

The Value of AccountingThe Value of Accounting

Why does accounting exist in everyWhy does accounting exist in every

organization?organization?

I explain this question in another way:I explain this question in another way:

what kind of unique value doeswhat kind of unique value doesaccounting possess?accounting possess?

The value must be fundamental and theThe value must be fundamental and the

society could not go without;society could not go without;

Another way to explain: Darwinism;Another way to explain: Darwinism;

Natural selection and the fittest survive;Natural selection and the fittest survive;



77

The Nature of FirmThe Nature of Firm

Although every organizationAlthough every organization

needs accounting, we just talk needs accounting, we just talk

about enterprise accounting forabout enterprise accounting for

simplicity;simplicity;

What is the nature of firm?What is the nature of firm?

We discuss about human natureWe discuss about human nature

first;first;



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The Nature of ManThe Nature of Man

Ethic Man;Ethic Man;

Human Nature: Virtue vs. Evil;Human Nature: Virtue vs. Evil;

Confucis vs.Confucis vs.

Hsun Tzu

Hsun Tzu

Economic Man;Economic Man;

There is no ethics concept inThere is no ethics concept in

Economists¶ dictionary;Economists¶ dictionary;It is not from the benevolence of the butcher,It is not from the benevolence of the butcher,

the brewer, or the baker that expect ourthe brewer, or the baker that expect our

dinner, but from their regards their owndinner, but from their regards their own

interest. (Adam Smith);interest. (Adam Smith);



99

The Nature of ManThe Nature of Man

We need a compound analytical tool;We need a compound analytical tool;

Maslow and the Hierarchy of Needs: the mostMaslow and the Hierarchy of Needs: the most

common tool;common tool;

Michael Jensen andWilliam MecklingMichael Jensen andWilliam Meckling

R EMMR EMM

R esourceful,R esourceful,

Evaluator,Evaluator,

Maximizer,Maximizer,

Model.Model.



1010


Classical theories;Classical theories;

A device to capture transaction costs;A device to capture transaction costs;

A nexus of contracts;A nexus of contracts;

Agency theory;Agency theory;

Economic Darwinism;Economic Darwinism;

,,,,,,,,

R EMM perspective:R EMM perspective:

A coalition of economic men;A coalition of economic men;



1111


On the coalition of economic men:On the coalition of economic men:

Why does R EMM join a firm?Why does R EMM join a firm?

Maximization of his own interests;Maximization of his own interests;

When does R EMM quit from a firm?When does R EMM quit from a firm?

Seek different chance to maximize his ownSeek different chance to maximize his own

interests;interests;

When we define human being as R EMM, weWhen we define human being as R EMM, we

have to solve the fundamental issue:have to solve the fundamental issue:

How does R EMM trust each other?How does R EMM trust each other?



1212


Without trust, we could not have even aWithout trust, we could not have even a

family, let alone a firm;family, let alone a firm;

R EMMs have to find efficient ways toR EMMs have to find efficient ways to

develop and maintain trust;develop and maintain trust;

They know that they have to;They know that they have to;

The problem is how;The problem is how;



1313


Historically, R EMMs have created andHistorically, R EMMs have created and

experimented numerous ways;experimented numerous ways;

Accounting is proven to be costAccounting is proven to be cost--effective;effective;

It is suitable to all kinds of firms,It is suitable to all kinds of firms,

No matter of their size,No matter of their size,

No matter of the geographic locations;No matter of the geographic locations;

No matter of ownership;No matter of ownership;



1414

The Evolution of AccountingThe Evolution of Accounting

Now that accounting is connected withNow that accounting is connected with

human nature and trusting issue, wehuman nature and trusting issue, we

may trace the history of accounting tomay trace the history of accounting to

the early days of human beings, orthe early days of human beings, or P rimitive Society P rimitive Society;;

the Incas and Quipu;the Incas and Quipu;



1515

Sumer andSumer and CUNEIFOR M CUNEIFOR M

Phoenician andPhoenician and AL PH AB ET AL PH AB ET



1616


Why do our ancestors invent Alphabet?Why do our ancestors invent Alphabet?

To build trusting via enhanced memory;To build trusting via enhanced memory;

This is the right value of Accounting.This is the right value of Accounting.

Chronology of spelling byChronology of spelling by Steve BettSteve Bett;; 3200 BC Writing developed as an extension of the3200 BC Writing developed as an extension of the

accounting system in Babylon;accounting system in Babylon;

A British accounting scholar claimed:A British accounting scholar claimed:

Phoenician inventedPhoenician invented AL PH AB ET AL PH AB ET

for the sake of accounting.for the sake of accounting.



1717


The primitive stage of accounting;The primitive stage of accounting;

A tool to help to maintain the trusts;A tool to help to maintain the trusts;

Alphabet, numeric and organizational control;Alphabet, numeric and organizational control;



1818


The birth of doubleThe birth of double--entry bookkeeping;entry bookkeeping;

A. C. Littleton on the birth of DEB;A. C. Littleton on the birth of DEB;

Another storyAnother story

The Crusaders (1095The Crusaders (1095--1270);1270);

Italian commodity economy, developed bank Italian commodity economy, developed bank

business;business;

DEB: the symbol of accounting science;DEB: the symbol of accounting science;



1919


From Bookkeeping to Financial AccountingFrom Bookkeeping to Financial Accounting

Capital market: accounting information isCapital market: accounting information iswidely circulated;widely circulated;

The most common users: outside of theThe most common users: outside of thereporting entity;reporting entity;

GAAP: the symbol of the conversion;GAAP: the symbol of the conversion;

F inancial Accounting F inancial Accounting is also called Externalis also called External

Accounting;Accounting;



2020


Industrial revolution and modern massIndustrial revolution and modern mass

manufacturing process;manufacturing process;

Business profiting model is changed;Business profiting model is changed;

Originally, buy low, sell high;Originally, buy low, sell high;

Now, buy raw materials, manufacture into productsNow, buy raw materials, manufacture into products

and sell out;and sell out;

The determination of the cost of manufacturedThe determination of the cost of manufactured

products is essential in profit determination;products is essential in profit determination;

C ost Accounting C ost Accounting is ³invented´;is ³invented´;



2121


From cost accounting to managementFrom cost accounting to managementaccounting;accounting;

More complicated business activities;More complicated business activities;

Dynamic and keepDynamic and keep--changing environment;changing environment; Much larger business scale;Much larger business scale;

Decision making:Decision making:much more complicated;much more complicated;

Management Accounting Management Accounting isis³³inventedinvented´;´;



2222


From commodity market to capital market;From commodity market to capital market;

The developing of capital market raises twoThe developing of capital market raises two

issues:issues:

Effective ways to raise and allocate capital;Effective ways to raise and allocate capital;

Trust crisis;Trust crisis;

We haveWe have C orporate F inanceC orporate F inance andand Auditing Auditing

subjects respectively.subjects respectively.



2323

AccountingAccounting

FirmsFirms

FirmFirmFirmFirm

Financial statementsFinancial statements investorsinvestorsFinancial

Accounting

Financial

Accounting

AuditingAuditing

FinanceFinanceManagement

Accounting

Management

Accounting

Cor porate Finance and AuditingCor porate Finance and Auditing



2424


Accounting will evolve with theAccounting will evolve with the

development of economy anddevelopment of economy and

technology;technology;

The invention of computer and its adoptionThe invention of computer and its adoption

into accounting practice;into accounting practice;

R educes time, effort and cost of R educes time, effort and cost of

recordrecord--keeping;keeping;Improves clerical accuracy;Improves clerical accuracy;

Changes the way we store, process andChanges the way we store, process and

summarize large masses of data;summarize large masses of data;



2525


Website and Internet;Website and Internet;

dissemination of accounting information:dissemination of accounting information:easy and no increment cost;easy and no increment cost;

Internet based financial reporting system;Internet based financial reporting system;

Extensible Business R eporting Language (XBR L) wasExtensible Business R eporting Language (XBR L) wasdeveloped to provide users with an efficient and effectivedeveloped to provide users with an efficient and effectivemeans of preparing and exchanging financial informationmeans of preparing and exchanging financial informationover the Internet.over the Internet.

Extensible Assurance R eporting Language (XAR L) wasExtensible Assurance R eporting Language (XAR L) wasdesigned to enable assurance providers to report on thedesigned to enable assurance providers to report on the

integrity of information distributed over the Internet andintegrity of information distributed over the Internet andhelp users and companies place warranted reliance on suchhelp users and companies place warranted reliance on suchinformationinformation

Events accounting: may be reEvents accounting: may be re--introduced underintroduced underinternet environment;internet environment;



2626


SOX and its impact on accounting;SOX and its impact on accounting;

Enron filed for bankruptcy protect inEnron filed for bankruptcy protect in

December 3, 2001;December 3, 2001;

WorldCom reported billions of false profit inWorldCom reported billions of false profit in

June, 2002;June, 2002;

SarbanesSarbanes--Oxley Act of 2002 was signed byOxley Act of 2002 was signed by

P

resident Bush and becameP

resident Bush and becamea law in June 30, 2002;a law in June 30, 2002;

It mainly focuses on accounting;It mainly focuses on accounting;



2727

The Boundary of AccountingThe Boundary of Accounting

Accounting: a boundless discipline;Accounting: a boundless discipline;

What should accountants supposed to do?What should accountants supposed to do?

For instance, the job description of CFO;For instance, the job description of CFO; The job description of chief controller;The job description of chief controller;

No definite definition;No definite definition;

No generally accepted principles;No generally accepted principles;



2828

You may useYou may use

knowledge freely asknowledge freely as

soon as you find thesoon as you find the

underlying regularity;underlying regularity;



2929

SummarySummary

The nature of firm: contemporary interestThe nature of firm: contemporary interestcoalition of R EMM;coalition of R EMM;

R EMMs have to find costR EMMs have to find cost--effective ways to buildeffective ways to buildtrust;trust;

Accounting is proven cheap and reliable;Accounting is proven cheap and reliable;Accounting is evolving with economy andAccounting is evolving with economy and

technology, etc;technology, etc; Four main branches: Financial accounting,Four main branches: Financial accounting,

management accounting, corporate financemanagement accounting, corporate financeand auditing;and auditing;

Computer and internet: already changedComputer and internet: already changedaccounting significantly;accounting significantly;



ATTENTION COMMERCE

STUDENTS

ATTENTION COMMERCE

STUDENTS ± ± ACCOUNTING(FINANCIAL & COST) OFACCOUNTING(FINANCIAL & COST) OF

± ± ICMAP STAGE 1,2,3,4 (NEW CLASSES)ICMAP STAGE 1,2,3,4 (NEW CLASSES)

± ±CA..MODULE B,C,DCA..MODULE B,C,D

± ± PIPFA (FOUNDATION,INTERMEDIATE,FINAL)PIPFA (FOUNDATION,INTERMEDIATE,FINAL)

± ± ACCAACCA--F1,F2,F3F1,F2,F3

± ± BBA,MBABBA,MBA

± ±B.COM(FRESH),M.COMB.COM(FRESH),M.COM

± ± MAMA--ECONOMICS..O/A LEVELSECONOMICS..O/A LEVELS

± ± KHALID AZIZ«..0322KHALID AZIZ«..0322--33857523385752

± ± http://finance.groups.yahoo.com/group/costhttp://finance.groups.yahoo.com/group/cost--

accountants/accountants/

± ± ACCOUNTING(FINANCIAL & COST) OFACCOUNTING(FINANCIAL & COST) OF

± ± ICMAP STAGE 1,2,3,4 (NEW CLASSES)ICMAP STAGE 1,2,3,4 (NEW CLASSES)

± ±CA..MODULE B,C,DCA..MODULE B,C,D

± ± PIPFA (FOUNDATION,INTERMEDIATE,FINAL)PIPFA (FOUNDATION,INTERMEDIATE,FINAL)

± ± ACCAACCA--F1,F2,F3F1,F2,F3

± ± BBA,MBABBA,MBA

± ±B.COM(FRESH),M.COMB.COM(FRESH),M.COM

± ± MAMA--ECONOMICS..O/A LEVELSECONOMICS..O/A LEVELS

± ± KHALID AZIZ«..0322KHALID AZIZ«..0322--33857523385752

± ± http://finance.groups.yahoo.com/group/costhttp://finance.groups.yahoo.com/group/cost--

accountants/accountants/

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What is Accounting i