1. Accounting: The Universal Language of Business

2. Accounting System
Accounting System: Designed to collect, document and report on financial transactions
affecting a business.
Two types:
Manual Accounting System: Processed by hand
Computerized Accounting System: Processed by entering information into a computer

3. Accounting System How it Works INPUTS PROCESSING OUTPUTS
Source Documents
Checks
Invoices
Sales Slips
Receipts
Task
Analyzing
Classifying
Recording
Financial and Management Accounting Reports
Financial conditions
Results of operations
Investments by and distributions to owners
Accountants report the results of operations and the financial conditions of the business
in which people invest

4. Generally Accepted Accounting Principles (GAAP)
A set of rules followed by accountants to
prepare financial statements
These rules are issued by the Financial
Accounting Standards Board (FASB)

5. User Groups Two groups Internal users (People inside the organization)
External users (People outside the organization
who have interest in the business)

6. Accounting Types
Financial Accounting
Managerial Accounting

7. Financial Accounting Reports
Used by external users
Who are external users
Investors
Banks and lending institutions
Governments
Labor Unions
Competitors

8. Managerial Accounting Reports
Used by internal users
Who are internal users
Managers

9. Accounting Assumption
Taking for granted that something is true
Based on three key assumptions
Business Entity: Business is a separate entity and
operates independently of a persons holdings
2) Accounting Period: A time frame covered by
an accounting report
3) Going Concern: The assumption that a business
possesses survivability indefinitely