Introduction to Accounting. Definition of Accounting Accounting is a language of business. As the American Accounting Association: “ accounting is the.

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Presentation transcript:

Introduction to Accounting

Definition of Accounting Accounting is a language of business. As the American Accounting Association: “ accounting is the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information.” An accountant is an information specialist.

Who use accounting Nonprofit and profit Organizations Federal government bureau Companies Small businesses

Financial statements P/L statement Balance sheet Cash flow statement

Friends Company Income Statement For the Period Ended 20X6 Revenue (i.e., assets increase)3,000 Expenses (i.e., assets decrease)(1,000) Net Income (i.e., change in net assets) $ 2,000

Friends Company Balance Sheet Period Ended 20X6 Assets$8,500 Total Assets8,500 Liabilities2,000 Equity Contributed Capital5,000 Retained Earnings1,500 Total Equity6,500 Total Liability and Equity (Claims) 8,500

Friends Company Statement of Cash Flows For the Period Ended 20X6 Cash Flows from Operating Activities Cash Receipts from Revenue$3,000 Cash Payments for Expenses(1,000) Net Cash Flow from Operating Activities 2,000 Cash Flows from Investing Activities 0 Cash Flows from Financing Activities Cash Receipts from Borrowing2,000 Cash Receipts from Capital Acquisitions 5,000 Cash Payments for Distributions(500) Net Cash Flow from Financing Activities 6,500 Net Increase in Cash8,500 Plus: Beginning Cash Balance0 Ending Cash Balance$8,500

Summary Accounting is a standard language of measuring financial performance by a variety of organizations. Accounting follows GAAP, which are guidelines for measuring and presenting financial information on a fair, consistent, and straightforward basis.