What is Accounting?

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• Defining Accounting

• Inputs to Accounting

• Outputs of Accounting

• Uses of Financial Reports

What Is Accounting?

Introduction to Accounting > What Is Accounting?


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• Accounting is thousands of years old; the earliest accounting records, which date

back more than 7,000 years, were found in Mesopotamia (Assyrians).

• Luca Pacioli's "Summa de Arithmetica, Geometria, Proportioni et Proportionalità"

represents the first known printed treatise on bookkeeping; and it is widely

believed to be the forerunner of modern bookkeeping practice.

• Double-entry bookkeeping is defined as any bookkeeping system in which there

was a debit and credit entry for each transaction.

Defining Accounting


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Token Accounting in Mesopotamia

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• In accounting, a journal entry is a logging of transactions into accounting journal

items.

• The extraction of account balances is called a trial balance.

• The purpose of the trial balance is, at a preliminary stage of the financial

statement preparation process, to ensure the equality of the total debits and

credits.

Inputs to Accounting


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The Balance Sheet



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• The balance sheet, reports on a company's assets, liabilities, and ownership

equity at a given point in time.

• The income statement is also referred to as profit and loss statement, or a "P&L."

This statement reports on a company's income, expenses, and profits over a

period of time.

• A statement of changes in shareholder's equity explains the changes of the

company's equity throughout the reporting period.

Outputs of Accounting


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A Sample Income Statement



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• Owners and managers require financial statements to make important business

decisions that affect its continued operations.

• Employees also need these reports in making collective bargaining agreements

with the management, in the case of labor unions or for individuals in discussing

their compensation, promotion, and rankings.

• Although laws differ from country to country, an audit of the financial statements

of a public company is usually required for investment, financing, and tax

purposes.

Uses of Financial Reports


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Auditing Firm



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Appendix

Key terms

• auditor A person who audits (reviews and examines) bookkeeping accounts

• bookkeeper A person responsible for keeping records or documents, such as of a business.

• bookkeeping The skill or practice of keeping books or systematic records of financial transactions, e.g., income and expenses.

• creditworthiness The property of being creditworthy, when a person is deemed likely to repay debts and / or has an acceptable credit rating

• debenture A certificate that certifies an amount of money owed to someone; a certificate of indebtedness.

• journal a book or computer file in which monetary transactions are entered the first time they are processed

• journal entry A journal entry, in accounting, is a logging of transactions into accounting journal items.The journal entry can consist of several items, each of which is either a debit or a credit.The total of the debits must equal the total of the credits or the journal entry is said to be "unbalanced." Journal entries can record unique items or recurring items, such as depreciation or bond amortization.

• ledger A collection of accounting entries consisting of credits and debits.


Introduction to Accounting

A Sample Income StatementExpenses are listed on a company's income statement.


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Journals to LedgersThe general ledger works as a central repository for accounting data transferred from all sub-ledgers or modules like accounts payable, accounts receivable, cash management, fixed assets, purchasing, and projects.


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BookkeepingBookkeeping is the recording of financial transactions, includng sales, purchases, income, receipts and payments by an individual or organization.


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Auditing FirmAuditing firm office building in San Francisco.


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Token Accounting in MesopotamiaThe invention of a form of bookkeeping using clay tokens represented a huge cognitive leap for mankind.


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Father of Double-Entry AccountingPortrait of Luca Pacioli, attributed to Jacopo de' Barbari, 1495 (Museo di Capodimonte).


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Accounting, bookkeeping and auditing represent:

A) the three fields of accounting

B) the three divisions of accountancy

C) the three accounting practices

D) the three major branches of accounting

Free to share, print, make copies and changes. Get yours at www.boundless.comBoundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/


Accounting, bookkeeping and auditing represent:

A) the three fields of accounting

B) the three divisions of accountancy

C) the three accounting practices

D) the three major branches of accounting






The most common way to communicate financial information about business entities is with:

A) bank statements

B) accountancy

C) financial statements

D) shareholder meetings



The most common way to communicate financial information about business entities is with:

A) bank statements

B) accountancy

C) financial statements

D) shareholder meetings






Today, accounting is called:

A) the backbone of business

B) the art of business

C) the language of business

D) the guideline for business



Today, accounting is called:

A) the backbone of business

B) the art of business

C) the language of business

D) the guideline for business






If a journal entry is "unbalanced", what does it mean?

A) debits equal credits

B) there are two credit entries

C) there are two debit entries

D) debits do NOT equal credits



If a journal entry is "unbalanced", what does it mean?

A) debits equal credits

B) there are two credit entries

C) there are two debit entries

D) debits do NOT equal credits






Statement of financial position and statement of income are derived from:

A) the journal entries

B) the general ledger

C) the financial statements

D) the special journals



Statement of financial position and statement of income are derived from:

A) the journal entries

B) the general ledger

C) the financial statements

D) the special journals






What is the foundation of the double entry bookkeeping system?

A) credits and debits

B) the T-account

C) the basic accounting equation

D) the general ledger



What is the foundation of the double entry bookkeeping system?

A) credits and debits

B) the T-account

C) the basic accounting equation

D) the general ledger






What statement would you read if you wanted to know the changes in a company's equity throughout the reporting period?

A) statement of shareholder's equity

B) statement of cash flows

C) income statement

D) balance sheet



What statement would you read if you wanted to know the changes in a company's equity throughout the reporting period?

A) statement of shareholder's equity

B) statement of cash flows

C) income statement

D) balance sheet






The income statement is also known as:

A) statement of cash flow

B) revenue report

C) statement of cash position

D) the profit and loss statement



The income statement is also known as:

A) statement of cash flow

B) revenue report

C) statement of cash position

D) the profit and loss statement






The financial statements should be:

A) understandable

B) all of these answers

C) relevant

D) comparable



The financial statements should be:

A) understandable

B) all of these answers

C) relevant

D) comparable






Which one of these is an example of when employees would use a company's financial statements?

A) before making a collective bargaining agreement

B) before discussing a raise

C) all of these answers

D) before deciding whether to work for a company or not



Which one of these is an example of when employees would use a company's financial statements?

A) before making a collective bargaining agreement

B) before discussing a raise

C) all of these answers

D) before deciding whether to work for a company or not






Which one of these is NOT an organization that would review the financial reports of a business?

A) potential creditors

B) potential investors

C) current shareholders

D) rival companies



Which one of these is NOT an organization that would review the financial reports of a business?

A) potential creditors

B) potential investors

C) current shareholders

D) rival companies




Attribution

• Wikipedia. "Financial statement." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_statement

• Wiktionary. "debenture." CC BY-SA 3.0 http://en.wiktionary.org/wiki/debenture

• Wikipedia. "journal entry." CC BY-SA 3.0 http://en.wikipedia.org/wiki/journal%20entry

• Wikipedia. "Accounting equation." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Accounting_equation

• Wikipedia. "Bookkeeping." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Bookkeeping

• Wikipedia. "Journal entry." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Journal_entry

• Wikipedia. "General ledger." CC BY-SA 3.0 http://en.wikipedia.org/wiki/General_ledger

• Wikipedia. "Journal." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Journal

• Wiktionary. "bookkeeper." CC BY-SA 3.0 http://en.wiktionary.org/wiki/bookkeeper

• Wiktionary. "creditworthiness." CC BY-SA 3.0 http://en.wiktionary.org/wiki/creditworthiness

• Wikipedia. "Financial statement." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_statement

• Wikipedia. "Accounting." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Accounting



• Wiktionary. "ledger." CC BY-SA 3.0 http://en.wiktionary.org/wiki/ledger

• Wiktionary. "bookkeeping." CC BY-SA 3.0 http://en.wiktionary.org/wiki/bookkeeping




http://en.wikipedia.org/wiki/Financial_statement


http://en.wiktionary.org/wiki/debenture


http://en.wikipedia.org/wiki/journal%20entry


http://en.wikipedia.org/wiki/Accounting_equation


http://en.wikipedia.org/wiki/Bookkeeping


http://en.wikipedia.org/wiki/Journal_entry


http://en.wikipedia.org/wiki/General_ledger


http://en.wikipedia.org/wiki/Journal


http://en.wiktionary.org/wiki/bookkeeper


http://en.wiktionary.org/wiki/creditworthiness%20


http://en.wikipedia.org/wiki/Financial_statement%20








http://en.wiktionary.org/wiki/ledger


http://en.wiktionary.org/wiki/bookkeeping

Education

What is Accounting?