,General View of Accounting,CHAPTER 1,Introduction of accounting,* Second oldest profession,* Participated in the development of nations, trade, finance, money and banking,* Double-entry bookkeeping fueled the Renaissance,Introduction of accounting,Luca Pacioli (1445-1517),Summa di Arithmetica,treatise on book-keeping,People have understood accounting on a scientific principle in Italy,Introduction of accounting,John Gouge, 1543,The first known English book on accounting,A Profitable Treatyce called the Instrument or Boke to learn to know the good order of the kepying of the famouse reconynge, called in Latyn, Dare and Habdare, and, in Englysh Debitor and Creditor.,Introduction of accounting,The first public recognition of accountants,A Bankruptcy Act,In 1831,It mentions accountants alongside merchants and bankers as properly skilled to conduct audits.,Introduction of accounting,Management accounting,World War One (1914-1918),Accountants assist in the control of costs in relation to the production of ammunitions: bullets, bombs, explosives, etc.,Introduction of accounting,After the Second World War,Development of accounting,Enron financial scandal,In August 2002, the Sarbanes-Oxley Act is passed in the United States.,Accounting Definition,Accounting,Bookkeeping,It is the means of recording transactions and keeping records.,Accounting,Bookkeeping,Bookkeeping is the day-to-day record-keeping involved in the process of accounting.,Accounting Definition,Accounting,Accurate financial reports,Useful to managers, regulators, and shareholders, creditors or owners,Accounting Definition,Major goal of accounting,Analysis,Interpretation,Use of information,Accounting Definition,The American Institute of Certified Public Accountants,“The art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof.”,(AICPA),Early definitions of accounting focused on the traditional record-keeping functions of the accountant.,Accounting Definition,The modern definition of accounting,It is defined as an information system that measures, processes, and communicates financial information about an identifiable economic entity.,Encyclopedia,Accounting is defined as the process of maintaining, auditing, and processing financial information for business purposes.,Accounting Definition,The modern accountant,record-keeping,Planning and problem solving Control and attention directing Evaluation Review Auditing,Accounting Definition,Business activities,Accounting,Data,Useful information,Decision maker,The Users of Accounting Information,Users,those who have a direct interest in the business including management;,2. those who have indirect interest in the business.,Users with Direct Financial Interest,Present and Potential Investors,Present and Potential Creditors,Management,Management,Management,Management is the group in a business who has overall responsibility for operating the business and for achieving the business goals.,Owners of the business,Hired managers,Major function of accounting,To provide management with relevant and useful information,Such as: what was the companys net income during the past year? What products are most profitable? What is the cost of manufacturing each product?,Management,Present and Potential Investors,They are interested in the past success of the business and its potential earnings in the future.,Operating results of business,Profit sharing policy,Make decisions,Whether to increase, or decrease investments,Present and Potential Creditors,They are interested in whether the company will have the cash to pay the interest and repay the debt at fixed time.,Banks,Finance companies,Mortgage companies,Securities firms,Insurance firms,Suppliers,Individuals,Users with Indirect Financial Interest,Tax Authorities,Other Groups,Tax Authorities,Tax authorities dont have direct financial interest in the company, but they usually analyze the tax status undertaken by a business to establish tax policy.,Governments,Income taxes Social security Payroll taxes Excised taxes Sales taxes,Each tax requires special tax returns and often a complex set of records as well.,Other Groups,They advise investors and creditors and have an Indirect interest in the financial performance of a business.,Financial analysts and advisers,brokers,lawyers,economists,the financial press,Other Groups,Customers,The general public,They are concerned about the operating results, the effects that corporations have on inflation, the environment, social problems, and the quality of life.,Other Group,Accounting Profession,Public Accounting,Government Accounting,Internal Auditing,Management Accounting,Public Accountants,Certified Public Accountants,The Work of Public Accountants,Work for their own compay Work for other accouting companies provide accounting se