ACCOUNTING BASIS LECTURE 1
LEARNING OBJECTIVES • Accounting A ti – An A IInformation f ti system t • History of accounting • Users U off A Accounting ti I f Information ti • Role of accounting • Types T off accounting ti
Accounting g - a process of identifying, recording, di summarizing, i i and d reporting economic information to decision makers. makers 3
ACCOUNTING – THE LANGUAGE OF BUSINESS
Accounting is the information system that... measures business activities, processes data into reports, and communicates results to decision makers. 4
The primary objective of accounting g is to p provide useful information for d i i makers. decision k
ACCOUNTING INFORMATION SYSTEM
INPU T
Process to: Analyze Record Summarize Report
OUTPU T
A HISTORY OF ACCOUNTING |Account
records date back to the ancient civilizations of China, Babylonia, y Greece, and Egypt. gyp |The rulers of these civilizations used accounting to keep track of the cost of labour and materials used in building structures like the great pyramids. 7
Accounts Table with Cuneiform S i t Script, circa 2400 BC by y Mesopotamian p Bookkeeper
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A HISTORY OF ACCOUNTING Accountingg developed p further as a result of the information needs of merchants in the city-states of Italy during the 1400s. | The Th monkk Luca L Pacioli, P i li a mathematician th ti i andd friend f i d off Leonardo da Vinci, published the first known description of double-entry bookkeeping in 1494. |
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A HISTORY OF ACCOUNTING | In
the Industrial Revolution of the nineteenth century, the growth of corporations spurred the development of accounting. | The corporation owners—the shareholders— were no longer necessarily the managers of their business. | Managers had to create accounting systems to report to the h owners how h well ll the h company was performing 10
HISTORY OF ACCOUNTING IN MONGOLIA 1911 . Governing by Bogd Khan 1924 -1964.Memorial order 1964-1990 . Journal order 1993 . Law of “Accounting “.
ROLE OF ACCOUNTING Information | Control | Managing |
Types off accounting
Financial accounting
Cost and g management accounting
Tax accounting
DIFFERENCE Financial accounting g
Management accounting g
Primary users
External users
Internal users
Purpose p of information
Help p information users make decision Information about p past performance Financial statements t t t regulated by GAAP
Help p managers g plan and control business operations Information about future performance Internal reports nott regulated g l t d by b GAAP
Timing
Type of report
Users of Accounting Information • investors investors | • creditors creditors di | EXTERNAL USERS
• regulators | regulators • customers | • customers competitors
| competitor
s
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Users of Accounting Information
EXTERNAL USERS
INTERNAL USERS
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• • • •
investors C di Creditors Regulators Customers
• Owners | owners • Managers | managers • Employees | employees
GAAP- Generally y accepted p accounting gp principles p The FASB currently sets accounting standards. IAS -40 standards IFRS-8 standards Laws in Mongolia in field of accounting: Accounting law Audit law Tax T laws l
Organizations g That constitute the body y of GAAP in Mongolia. | Ministry of Finance | Mongolian Institute of Certified Public Accountants
FORMS OF BUSINESS ORGANIZATION Sole proprietorship p p p | Partnership | Corporation |
BUSINESS ACTIVITY Investing g | Financing | Operating |