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Accounting: The Universal Language of Business

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Presentation on theme: "Accounting: The Universal Language of Business"— Presentation transcript:

1 Accounting: The Universal Language of Business
The Accounting System

2 Accounting System Accounting Systems - designed to collect, document, and report on financial transactions affecting business. Manual Accounting System – processed by hand. Computerized System – financial information is recorded by entering it into a computer. Owners and investors who risk their money depend on the financial condition of the businesses in which they invest.

3 Accounting System GAAP (Generally Accepted Accounting Principles) – all accountants use the same set of rules to prepare financial reports. The Financial Accounting Standards Board (FASB) issue these rules. Financial Reports – summarized information about the financial status of a business. Language of Business – because it is so fundamental to the communication of financial information, accounting is often called the “language of business.

4 Who Uses Accounting Reports?
Informed Decisions Individuals outside the business who have an interest in the business. Individuals inside the business.

5 Accounting Reports Financial Accounting - focuses on reporting information to external users. Management Accounting (Managerial Accounting) - focuses on reporting information to management, often referred to as accounting for internal users of accounting information. - Describe a few situations in which individuals might use financial and management accounting reports.

6 Accounting Assumptions
Business Entity - The business exists independently of its owner’s personal holdings. For accounting purposes businesses are separate entities from their owners. Accounting Period – A period of time covered by an accounting report. Going Concern – Although many businesses fail within the first five years, the accountant assumes the business will continue to operate unless it is clear that it cannot survive.


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