1. Unit 1
ACCOUNTING IN ACTION

2. Introduction Why Learn?
Why would you want to learn bookkeeping and keep up to date financial records anyway ?
Can't you hire an accountant to come after the end of the year and get your check book and shoe box and do your taxes ?
Sure you can ! And yes you will have adequately fulfilled your taxpayer obligations.

3. But in order to run a business and
know what, where, and when to
take corrective actions requires
business information.
How do you get and where do you find this information ?
You don't if you don't keep accurate
and current records about your
business financial activities.

4. BOOKKEEPING DISTINGUISHED FROM ACCOUNTING
Includes bookkeeping
2. Also includes much more
Accounting:
Is the art of analyzing, recording, summarizing, reporting, reviewing, and interpreting financial information.

5. Bookkeeping Bookkeeping:
1. Involves only the recording of economic events.
2. Is just one part of accounting
Bookkeeping:
Is the process of recording and classifying business financial transactions (activities).
Bookkeeping's objective is simply to record and summarize financial transactions into a usable form that provides financial information about a business or an individual.

6. THE ACCOUNTING PROCESS
Gerald Trenholm
7 MacCauly Drive
Fredericton NB
Identification
Select economic events
(transactions)
Recording
Record, classify,
and summarize
Accounting Reports
SOFTBYTE
Annual Report
Prepare
accounting reports
Analyse and interpret
for users
Communication
2000

7. STEPS IN THE ACCOUNTING CYCLE
1. Source Documents:
Analyse Transactions
9. Prepare post-closing trial balance
2. Journalize the transactions
3. Post to ledger accounts
8. Journalize and post closing entries
4. Prepare a trial balance
7. Prepare financial statements
5. Journalize and post adjusting entries
6. Prepare adjusted trial balance

8. Users of Financial Information
Who needs financial information about a business besides the owner(s) ?
Users can be grouped into two broad categories namely internal users and external users.
Internal users are the managers and
the owners and employees who actually
work for the business.
External users include lenders and other creditors (suppliers), investors, customers, and governmental regulatory and taxing agencies.

9. Why do they need financial information ?
Users need this information to make knowledgeable decisions.
Lenders and other creditors want to make sure that
they will be paid back for the credit that they have
extended to a business.
By analyzing financial information, they at least have something to base their lending or credit decision on.
The days of the "friendly" banker are gone.
You need to provide them with financial
information as a basis for their loan decisions.
A "good ole boy" handshake won't cut it now.
Customers also want to make sure that the business
they're buying products or services from is going to
be around and not be in such a poor financial position
as to have to close its doors.

10. QUESTIONS ASKED BY INTERNAL USERS
Is cash sufficient to pay bills?
What is the cost of manufacturing each unit of product?
Which product line is the most profitable?
Can we afford to give employees pay raises this year?

11. QUESTIONS ASKED BY EXTERNAL USERS
Is the company earning satisfactory income?
How does the company compare in size and profitability with its competitors?
Will the company be able to pay its debts as they come due?
What do we do if they catch us?

12. THE ACCOUNTING PROFESSION
Public accountants offer their expertise to the general public through the services they perform.
Private accountants are employees of individual companies and are involved in a number of activities, including cost and tax accounting, systems, and internal auditing.
Not-for-profit accounting includes reporting and control for government units, foundations, hospitals, labour unions, colleges/universities, and charities.

13. ETHICS To Solve Ethical Dilemma
1. Recognize situation and ethical issues involved
2. Identify and analyse elements
3. Identify alternatives and weigh effects on stakeholders
Ethics
Standards of conduct