COURSE INFORMATION

PRINCIPLES OF ACCOUNTING I
MR. ENUSAH ABDULAI
0241115363
aenusah001@st.ug.edu.gh
 DEFINITON OF ACCOUNTING
.
American Institute of Certified Public
American Accounting Association (AAA)
Accountants (AICPA)
 The process of identifying, measuring,
A service activity whose function is to provide
and communicating economic
quantitative information, primarily financial
information to permit informed
in nature, about economic entities that is
judgements and decisions by users of
intended to be useful in making economic
the information.”
decisions.
 PRIMARY FUNCTION OF ACCOUNTING
.
Primarily, Accounting acts as an Aid to Decision Making by
supplying the information that decision makers need to
make reasoned choices among alternative uses of scarce
economic resources.

Specifically, accounting involves

Recording data about business transactions- Manual/

Electronic [book keeping]
Summarizing results of business activity into useful report-
The balance sheet and income statement are primary
reports
Providing assurances that the business is operating as
intended and that the assets of the organization are
safeguarded
 Users' and stakeholders' needs
.
 There are various groups of people who need
information about the activities of a business.
 'The objective of financial statements is to provide
information about the financial position,
performance and changes in financial position of an
entity that is useful to a wide range of users in
making economic decisions.' (IASB conceptual
Framework)
 Large businesses are of interest to a greater variety
of people and so we will consider the case of a large
public company, whose shares can be purchased and
sold on a stock exchange.
Discussion!!
Indicate the interest of the following stakeholders and
their informational needs.
 Managers of the company
 Shareholders of the company,
 Trade contacts (e.g. suppliers and customers)
 Providers of finance to the company (e.g. banks)
 Employees of the company
 Financial analysts and advisers
 Government and their agencies
 The public.
 Responsibility For The Preparation Of Financial Statements
.
Specifically, directors are responsible for:

The preparation of the FS of the company in accordance with the applicable financial reporting
framework (e.g. IFRSs)

 To ensure internal controls are free from material misstatement, whether due to error or fraud
 The prevention and detection of fraud
 Directors should explain their responsibility for preparing accounts in the financial statements.
 They should also report that the business is a going concern.
 Directors should present a balanced and understandable assessment of the company's position and
performance
 The directors should also explain the basis on which the company generates or preserves value and
the strategy for delivering the company's longer-term objectives.
 The Main components of Financial statements
.

 The complete set of financial statements entails the

following:
 Statement of profit or loss and other comprehensive
income
 Statement of financial position
 Statement of changes in equity
 Statement of cash flows  These are discussed further
 Notes to accounts
 Comparative year information
 Opening Statement of financial position in respect of
retrospective application or restatement of a change in
accounting policy or error, or when entity first adopts the
IFRSs
 The statement of profit or loss and other comprehensive incomes
.
 This statement basically measures the financial
performance of an entity
 The statement shows whether the business has had more
revenue than expenditure (a profit) or vice versa (loss).
 Basic Elements under Profit or Loss statement includes
incomes, revenues, and expenses.
 The IASB's Conceptual framework defines income, revenue and
expenses as follows.
 Income is increases in economic benefits during the accounting
period in the form of inflows or enhancements of assets or
decreases of liabilities that result in increases in equity, other
than those relating to contributions from equity participants.
 Revenue is the gross inflow of economic benefits (cash,
receivables, other assets) arising from the ordinary operating
activities of an enterprise (such as sales of goods, sales of
services, interest, royalties and dividends).
 Expenses are decreases in economic benefits during the
accounting period in the form of outflows or depletions of assets
or incurrences of liabilities that result in decreases in equity,
other than those relating to distributions to equity participants.
 The statement of financial Position
.
 The statement of financial position was once called the
balance sheet.
 It is one of the main financial statements and it reports an
entity's assets, liabilities, and the difference in their totals.
 Three Specific elements under the SOFP include
Assets, Liabilities and Equity
 The IASB's Conceptual framework defines assets,
liabilities and equity as follows.
 An asset is a resource controlled by an entity as a result of
past events and from which future economic benefits are
expected to flow to the entity. (assignment)
 A liability is a present obligation of the entity arising from
past events, the settlement of which is expected to result
in an outflow from the entity of resources embodying
economic benefits.
 Equity is the residual interest in the assets of the entity
after deducting all its liabilities.
 INTERIM ASSESSMENT: GROUP OF 5
.
REGULATORY FRAMEWORK OF ACCOUNTING

1. AN OVERVIEW OF ACCOUNTING REGULATORY SYSTEM

2. CONVERGENCE AND HARMONISATION OF ACCOUNTING
STANDARDS
3. IASB
4. THE IFRS FOUNDATION AND THE STRUCTURE OF IFRS
FOUNDATION
5. THE STANDARD SETTING PROCESS
 INTERIM ASSESSMENT: GROUP OF 5
.
REGULATORY FRAMEWORK OF ACCOUNTING

1. AN OVERVIEW OF ACCOUNTING REGULATORY SYSTEM

2. CONVERGENCE AND HARMONISATION OF ACCOUNTING
STANDARDS
3. IASB
4. THE IFRS FOUNDATION AND THE STRUCTURE OF IFRS
FOUNDATION
5. THE STANDARD SETTING PROCESS