Introduction to

Accounting
Welcome to the world of accounting! This presentation will
provide a comprehensive overview of accounting principles,
practices, and its vital role in business.

by Mae Erillo
What is Accounting?
Accounting is a system for recording, classifying, summarizing,
and reporting financial transactions. It provides a financial
picture of an organization's performance and financial position.

Financial Reporting Cost Accounting

Creating financial Tracking and analyzing
statements for external the cost of production and
stakeholders like operations.
investors and creditors.

Tax Accounting Auditing

Ensuring compliance with Evaluating the accuracy
tax regulations and and reliability of financial
preparing tax returns. records.
Importance of Accounting
Accounting plays a crucial role in decision-making, financial planning, and ensuring transparency and accountability. It helps
businesses track their progress, make informed decisions, and attract investors.

1 Decision Making 2 Financial Planning

Accounting data helps businesses make informed Accounting provides a framework for budgeting,
decisions about pricing, investments, and resource forecasting, and managing cash flow.
allocation.

3 Investor Confidence 4 Compliance and Accountability

Accurate accounting practices build trust with investors Accounting ensures compliance with regulations and
and lenders. promotes transparency and accountability.
Generally Accepted
Accounting Principles (GAAP)
GAAP is a set of accounting standards that provide a common language for financial
reporting. These principles ensure consistency, comparability, and reliability of
financial statements.
Consistency Using the same accounting methods
from period to period.

Accrual Accounting Recognizing revenue when earned

and expenses when incurred,
regardless of when cash is received or
paid.
Matching Principle Matching expenses to the revenues
they generate.

Going Concern Assuming a business will continue to

operate in the foreseeable future.
Financial Statements
Financial statements are key outputs of the accounting process. They provide a snapshot of a company's
financial health and performance.

Balance Sheet Income Statement Statement of Cash Flows

Shows assets, liabilities, and Reports revenues, expenses, and Tracks the movement of cash in
equity at a specific point in time. net income over a specific and out of a business over a
period. period.
Accounting Cycle
The accounting cycle is a systematic process for recording, summarizing, and reporting financial transactions. It involves a series
of steps that ensure accuracy and completeness.

1 Source Documents
Original records of transactions, such as invoices, receipts, and sales slips.

2 Journalizing
Recording transactions in chronological order in a journal.

3 Posting
Transferring journal entries to the general ledger, a summary of all accounts.

4 Trial Balance
A list of all accounts and their balances, ensuring the accounting equation remains balanced.

5 Adjusting Entries
Adjusting accounts at the end of an accounting period to reflect accrued revenues and expenses.

6 Financial Statements
Preparing the balance sheet, income statement, and statement of cash flows.
Accounting Concepts and Principles
Accounting concepts and principles provide a framework for recording and reporting financial transactions. They ensure
consistency, objectivity, and reliability in accounting.

Monetary Unit Going Concern Time Period Matching Principle

Principle Assumption Assumption
Expenses are matched to
Transactions are recorded A business is assumed to Financial information is the revenues they
in a common currency. continue operating in the reported for specific generate.
foreseeable future. periods.
Types of Accounting
Accounting can be categorized into different types depending on its purpose, scope,
and target audience.

Financial Accounting
Provides information for external stakeholders, such as investors and creditors.

Managerial Accounting
Provides information for internal decision-making, such as budgeting and
cost analysis.

Tax Accounting
Focuses on tax compliance and tax planning.

Cost Accounting
Tracks and analyzes the costs of production and operations.
Basic Accounting
Concepts
Understanding basic accounting concepts is essential for
interpreting financial statements and making sound financial
decisions.

1 Accounting 2 Double-Entry
Equation Bookkeeping
Assets = Liabilities + Equity Every transaction
affects at least two
accounts.

3 Debit and Credit

Debits increase asset and expense accounts, while credits
increase liability, equity, and revenue accounts.
Principles of Accounting
Accrual Principle: This principle states that revenues and expenses should be recognized in the accounting
period in which they are earned or incurred, regardless of when the actual cash is received or paid. This
allows for a more accurate representation of the company's financial performance.
Consistency Principle: This principle requires that a company use the same accounting methods and
practices consistently over time. This ensures comparability of financial information across different reporting
periods, allowing for meaningful analysis and decision-making.
Conservatism Principle: The conservatism principle dictates that when there is uncertainty about the
outcome of a transaction, the accountant should choose the option that results in lower asset values and
higher liabilities. This helps to prevent the overstatement of a company's financial position.
Cost Principle: According to the cost principle, assets are recorded on the balance sheet at their historical
purchase price, rather than their current market value. This provides an objective and verifiable basis for
valuation, which is important for financial reporting and decision-making.
Going Concern Principle: The going concern principle assumes that the business will continue to operate
indefinitely, rather than being liquidated or entering bankruptcy. This assumption affects the way assets and
liabilities are reported and how transactions are recorded.
Conclusion and Key Takeaways
Accounting is an essential part of any successful business. By understanding accounting principles, concepts,
and practices, you can make informed financial decisions, build trust with stakeholders, and achieve your
financial goals.

Financial Reporting Decision Making Investor Confidence

Accurate financial statements Accounting data supports Strong accounting practices build
provide transparency and informed decisions about trust with investors and lenders.
accountability. investments and resource
allocation.