Chapter 8 The role of accouting Qiang Jiang School of Business Sichuan University, China

Topic list 1 The purpose of accounting information 2 Nature, principles and scope of accounting 3 The regulatory system 4 Internal and external financial information 5 Control over business transactions 6 The main business financial systems 7 Manual and computerised accouting systems 8 Databases and spreadsheets

1 The purpose of accounting information Accounting is a way of recording, analysing and summarising transactions of a business. – transactions are recorded in books of prime entry; – transactions analysed and posed to the ledgers; – transactions summarised in the financial statement.

1 The purpose of accounting information Accounting systems are affeceted by – Size – Type of organisation – Organisation structure

1 The purpose of accounting information The need for accounts – Luca Pacioli in – The first English book in 1543.the practice of double entry bookkeeping has barely changed since then and is standard across the world. – The original role of the accounting function was to record financial information and this is still its main focus. – There are various groups of people who want or need to know company information.

1 The purpose of accounting information User of financial statements and accounting information – Managers – Shareholders – Trade contacts – Providers of finance to the company – Her majesty` s revenue and customs – Employees – Financial analysts and advisers – Government and their agencies – The public

1 The purpose of accounting information Qualities of good accounting information – Relevance – Comprehensibility – Reliability – Completeness – Objectivity – Timeliness – comparability

1 The purpose of accounting information The structure of accounting functions Relevance

2 Nature, principles and scope of accounting Financial accounting and management accouting – Financial accounting is mainly a method of reporting the results and financial position of a business. – Management accounting is a management information system which analyses data to provide information as a basis for managerial action.the concern of a management accountant is to present accounting information in the form most helpful to management.

2 Nature, principles and scope of accounting The application of information

2 Nature, principles and scope of accounting Financial management

2 Nature, principles and scope of accounting Auditing

3 The regulatory system Auditing

3 The regulatory system Factors shaped financial accounting – Company law – Accounting concepts and individual judgement – Accounting standards – The European Union – Other international influences – Generally accepted accounting practice

3 The regulatory system Factors shaped financial accounting – Company law – Accounting concepts and individual judgement – Accounting standards – The European Union – Other international influences – Generally accepted accounting practice

4 Internal and external financial information External reports The income statement The statement of financial position The statement of cash flows Internal reports Cost schedules

5 Control over business transactions office organisation – Purchasing: responsible for ensuring necessary purchases are made – Human resources :responsible for hiring and firing of staff, for training of staff and for the general welfare of the employees. – Finance: very wide range – Sales and marketing :deal with taking sales orders, advertising, and any sales personnel. – General administration: very wide range