Accounting for a Service Business Unit 1.1 What is Accounting.

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Presentation transcript:

Accounting for a Service Business Unit 1.1 What is Accounting

Accounting Information You likely have a general idea of what accountants do...  They record information about the transactions and business events of a business and summarize this activity in reports that are used by interested parties What you do not realize is the complexity of accomplishing this task...

Analogy What does a heart surgeon do? What knowledge was needed in order to master this skill? A true understanding of what an accountant does is not an easy question. In fact, if you were to ask a professional accountant what they do, the answers would be confusing and very indirect

Accounting Defined A set of concepts and techniques that are used to measure and report financial information about an economic unit. An economic unit is generally considered to be a separate business entity. This information is reported to a variety of interested parties:  Employees, managers, creditors, investors to name a few...

Standards Financial accounting is prepared under the premise of recognized principles. In Canada, until January 2011, these principles were referred to as GAAP  Generally Accepted Accounting Principles However, as of January of this year, Canada has adopted IFRS  International Financial Reporting Standards

IFRS All publicly accountable enterprises and government business enterprises will be required to change to IFRS from GAAP There are many similarities between the two, but there are also significant differences  Canada is the first North American country to adopt IFRS  It is being practised all over the world

Distinctions? Generally, Canadian GAAP and IFRS are very similar in terms of the style and form of the individual standards, and the fact that the standards are based on a similar conceptual framework. The main areas of IFRS considered to create the most significant changes from Canadian GAAP are:  Impairment  Revaluations It is important to remember that the areas within IFRS that may create significant changes (from accounting policies under Canadian GAAP) will depend on an organization’s individual circumstances.

Limitations in Accounting Accounting data is not absolute Considerable amounts of judgement and estimation are required Accounting has not yet advanced to a state of being able to value a business using current economic valuation Land must still be recorded at the acquisition cost, which may be far less than the market value today