Chapter 1

- 15 th Century - Italy - Luca Pacioli documented the double entry system - Professor in Mathematics - Taught Mathematics (also to Leonardo da Vinci) - Publication: "Everything about Arithmetic, Geometry, and Proportions."

"give the trader without delay information as to his assets and liabilities” He warned that “a person should not go to sleep at night until the debits equalled the credits!”

- Industrial revolution, 18 th century - Credit transactions grew - Need to have more understanding of cost and pricing – Management accounting

Financial accounting The systematic identification, measurement, recording and reporting of quantitative and qualitative information in respect of economic activities of an entity. Management accounting To provide information to the management of an entity that helps with decision making. It goes further than financial accounting.

Financial accounting versus management accounting - Financial accounting reports financial information to external users of the information according to certain standards and formats. Mostly historical. - Management accounting provides financial information to internal users and goes into more detail about for example: (i) price and profit per product, (ii) profitability of different divisions and (iii) productivity of the workforce. Historical & forward looking

Financial Management Entails the planning, monitoring and controlling of the money and assets of an entity in order to maximise shareholder wealth. Examples: - Making decision of where to obtain loans. - Projecting future cash flows in order to manage cash resources appropriately.

Role of the auditor To express an opinion on the fair presentation of financial statements and whether or not it has been prepared in accordance with IFRS.

IASB (International Accounting Standards Board) publishes IFRS (International Financial Reporting Standards) since 2001 Professional movement: - SAICA – become a member to be a CA (SA) - ICAN – become a member to be a CA (Nam)

Professional movement: - IRBA – Independent Regulatory Board of Auditors - PAAB – Public Accountants’ and Auditors’ Board (Namibia) - SAIPA – SA Institute of Professional Accountants

- Financial accounting: the recording of transactions and events in the accounting records of an entity and presenting and disclosing these events - Management accounting - Financial management - Auditing - Internal control - Taxation

The accounting process 12 Transaction/ event Journal (GJ) (prime entry) General ledger (accounts) Trial balance/list & adjustments AFS (Annual financial statements) of: -Statement of profit or loss (P&L) & OCI -Statement of financial position (SFP) -Statement of changes in Equity (SCE) -Cash flow statement (C/F) -Notes & policies

ASSETS = EQUITY + LIABILITIES INCOME (+) EXPENSES (-)

Indicate the effect (+ and -) on the accounting equation of the following transactions: 1) Owner contributes R cash as capital. 2) Purchase inventory for R2 000 cash. 3) Pay rent expense R5 000 cash. 4) Obtain loan from Bank for R ) Pay water & electricity R1 000 cash.

 Financial position – assets & liabilities: middle of p.22 – end of p.25