Financial accounting • 1- Accounting in Action • 2- The Recording Process • 3- Adjusting the Accounting • 4- Competing the Accounting Cycle
Nabil Abd Elraouf • www.drnabil4362.wordpress.com
Is the art of communicating financial information about a business entity to users such as shareholders and managers. • The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management. • It is the branch of mathematical science that is useful in discovering the causes of success and failure in business. • The principles of accountancy are applied to business entities in three divisions of practical art, named • accounting, bookkeeping, and auditing. Accountancy
Accounting • Is defined by the AICPA as : "The art of recording, classifying, and summarizing in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof."
Nature of Financial Accounting Accounting may best be defined by describing the three essential characteristics of accounting: • (1) Identification, measurement, and communication of financial information about • (2) economic entities to • (3) Interested persons.
Understand the Accounting Framework • What Does Accounting Cycle Mean?The name given to the collective process of recording and processing the accounting events of a company. The series of steps begin when a transaction occurs and end with its inclusion in the financial statements. The nine steps of the accounting cycle are:
Collecting and analyzing data from transactions and events. • Putting transactions into the general journal. • Posting entries to the general ledger. • Preparing an unadjusted trial balance. • Adjusting entries appropriately. • Preparing an adjusted trial balance. • Organizing the accounts into the financial statements. • Closing the books. • Preparing a post-closing trial balance to check the accounts.
Accounting Journal Entries Illustratedillustrate the process, let's review how (AYX) started his business on January 1, 2007, and record those transactions in the general journal. • Jan. 1 (AYX) invested $50,000 into his new business, (AYX) Sunglasses Shop , putting in cash. • Jan. 1 Purchased inventory for $4,500. Paid $3,000 cash, with the balance of $1,500 due in 90 days. • Jan. 1 Purchased land for $20,000 with $2,000 as a down payment, and a 15 year mortgage for $18,000. • Jan. 1 to paid as insurance for the year for $2,400.
Sample General Ledger Journal EntryAs a quick recap, the following transactions occurred on January 1, 2007 to start (AYX) Sunglasses Shop: • Jan. 1 (AYX) invested $50,000 into his new business, (AYX) Sunglasses Shop. • Jan. 1 purchased inventory for $4,500. Paid $3,000 cash, with the balance of $1,500 due in 90 days. • Jan. 1 purchased land for $20,000 with $2,000 as a down payment, and a 15 year mortgage for $18,000. • Jan. 1 Purchased insurance for the year for $2,400.