Ethiopian Orthodox Tewahedo Church Archdiocese Of The Caribbean And Latin America Parishes
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Ethiopian Orthodox Tewahedo Church in the
Caribbean and Latin America
Financial Accounting
Presenter – Everald Hemmings (Surrafuel)Introduction to Financial Accounting and Standards
What Is Accounting?
• Accounting is the process of recording financial transactions
pertaining to a business/ organization.
• The accounting process includes summarizing, analyzing, and
reporting these transactions to oversight agencies,
regulators, and tax collection entities.
• The financial statements used in accounting are a concise
summary of financial transactions over an accounting period,
summarizing a company's/ organization's operations,
financial position, and cash flows.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
How Accounting Works
• Accounting is one of the key functions for almost any
business.
• It may be handled by a bookkeeper or an accountant at a
small firm, or by sizable finance departments with dozens of
employees at larger companies.
• The reports generated by various streams of accounting,
such as cost accounting and managerial accounting, are
invaluable in helping management make informed business
decisions.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
How Accounting Works
• Regardless of the size of a business/organization, accounting
is a necessary function for decision making, cost planning,
and measurement of economic performance.
• A bookkeeper can handle basic accounting needs and is a
person who records the day-to-day financial transactions of a
business /organization.
• The bookkeeper is usually responsible for writing the
daybooks, which contains records of purchase, sales, receipts
and payments.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
How Accounting Works
• The bookkeeper brings the books to the Trial balance stage:
an accountant may prepare the income statement and
balance sheet using the trial balance and ledgers prepared
by the bookkeeper.
• A Certified Public Accountant (CPA) should be utilized for
larger or more advanced accounting tasks.
• Two important types of accounting for businesses are
managerial accounting and cost accounting.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
How Accounting Works
• Managerial accounting helps management teams make
business/organizational decisions.
• Cost accounting helps business owners decide how much a
product should cost.
• Professional accountants follow a set of standards known as
the Generally Accepted Accounting Principles (GAAP) when
preparing financial statements.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
Types of Accounting - Financial Accounting
• Financial Accounting refers to the processes used to
generate interim and annual financial statements.
• The results of all financial transactions that occur during an
accounting period are summarized into the balance
sheet, income statement, and cash flow statement.
• The financial statements of most companies/ organizations
are audited annually by an external Certified Public
Accountant firm.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
Types of Accounting – Financial Accounting cont’d
• For some, such as publicly traded companies/ incorporated
organizations , audits are a legal requirement.
• Lenders (banks and financial institutions) also typically
require the results of an external audit annually as part of
their debt covenants.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
Types of Accounting – Managerial Accounting
• Managerial Accounting uses much of the same data as financial
accounting, but it organizes and utilizes information in different
ways.
• Namely, in managerial accounting, an accountant generates
monthly or quarterly reports that a business's /organization’s
management team can use to make decisions about how the
business/organization operates.
• Managerial accounting also encompasses many other facets of
accounting, including budgeting, forecasting, and various
financial analysis tools.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
Types of Accounting – Cost Accounting
• Cost Accounting helps businesses make decisions about
costing.
• Essentially, cost accounting considers all of the costs related
to producing a product.
• Analysts, managers, business owners and accountants use
this information to determine what their product should
cost.
• In cost accounting, money is cast as an economic factor in
production.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
Requirements for Accounting
• In most cases, accountants use Generally Accepted Accounting
Principles (GAAP) when preparing financial statements in the
United States.
• GAAP is a set of standards and principles designed to improve
the comparability and consistency of financial reporting across
industries.
• Its standards are based on double-entry accounting, a method in
which every accounting transaction is entered as both a debit
and credit in two separate general ledger accounts that will roll
up into the balance sheet and income statement.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
Accounting Standards
• An accounting standard is a common set of principles,
standards and procedures that define the basis of financial
accounting policies and practices.
• Accounting standards apply to the full breadth of a entity’s
financial picture, including assets, liabilities, revenue,
expenses and shareholders' equity.
• Banks, investors, and regulatory agencies, count on
accounting standards to ensure information about a given
entity is relevant and accurate.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
Accounting Standards
• Accounting standards improve the transparency of financial
reporting in all countries.
• In the United States, the GAAP form the set of accounting
standards widely accepted for preparing financial statements.
• International companies follow the International Financial
Reporting Standards.
• These are set by the International Accounting Standards
Board and serve as the guideline for non-U.S. GAAP companies
reporting financial statements.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
History of Accounting
• The history of accounting has been around almost as long as
money itself.
• Accounting history dates back to ancient civilizations in
Mesopotamia, Egypt, and Babylon.
• For example, during the Roman Empire the government had
detailed records of their finances.
• Modern accounting as a profession has only been around
since the early 19th century.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
History of Accounting
• Luca Pacioli is considered “The Father of Accounting and
Bookkeeping” due to his contributions to the development
of accounting as a profession.
• An Italian mathematician and friend of Leonardo da Vinci,
Pacioli published a book on the double-entry system of
bookkeeping sometime between 1470 and 1517.
• By 1880, the modern profession of accounting was fully
formed and recognized by the Institute of Chartered
Accountants in England and Wales.
Introduction to Financial Accounting and Standards
Introduction to Financial Accounting and Standards
History of Accounting
• This institute created many of the systems by which
accountants practice today.
• The formation of the Institute occurred in large part due to
the Industrial Revolution.
• Merchants not only needed to track their records but sought
to avoid bankruptcy as well.