Brief History

Evidence of accounting records can be found in the Babylonian Empire (4500 B.C.), in pharaohs' Egypt and in the Code of Hammurabi (2250 B.C.). Fra Luca is the father of accounting. His book Summa (1494) was one of the first published books that became the "textbook" for the next 500 years. His system included most of today's accounting routines.
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Accounting: The Language of Business

Accounting as an Aid to Decision Making

Accounting information is useful to anyone who makes decisions that have economic results.

Managers want to know if a new product will be profitable. Owners want to know which employees are productive. Investors want to know if a company is a good investment. Creditors want to know if they should extend credit, how much to extend, and for how long. Government regulators want to know if financial statements conform to requirements.

1.1.2 What is Accounting?

Accounting
is a system that Records information Relevant that is Communicates Identifies

Reliable to help users make better decisions.

Comparable

Accounting as an Aid to Decision Making

Fundamental relationships in the decisionmaking process:

Event

Accountants analysis & recording

Financial Statements

Users

1.4 Difference between accounting and book-keeping

Book-keeping: Is the basis of accounting Confines itself to recording posting balancing and preparation of trial balance. It is done by junior staff because the nature is clerical. It records transactions in a significant and orderly manner. It covers journalizing, posting and extracting of balances. Accounting: Includes book-keeping. Extends to preparation of final accounts after incorporating year end adjustments. It is done by senior staff because the nature of the job requires imagination, skill and analytical ability. It classifies, summarizes and provides information. It covers preparation of final accounts and balance sheet.

Financial and Management Accounting

The major distinction between financial and management accounting is the users of the information.
Financial accounting serves external users. Management accounting serves internal users, such as top executives, management, and administrators within organizations.

1.2 Function of Financial Statements

To provide information about the financial position, performance and cash flow of an enterprise that is useful to a wide range of users in making economic decisions. To provide information about the assets, liabilities, equity, income and expenses (including gains and losses) of an enterprise. To provide information on the stewardship of management i.e. the accountability of management to the resources entrusted to them
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Financial Statements

Income StatementA summary of the revenue and expenses for a specific period of time. Statement of Changes in EquityA summary of the changes in the owners equity that have occurred during a specific period of time. Balance SheetA list of the assets, liabilities, and owners equity as of a specific date. Statement of Cash flowsA summary of the cash receipts and disbursements for a specific period of time.

The End