FINANCIAL ACCOUNTING I.pdf - MABD 505: FINANCIAL ACCOUNTING...

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MABD 505: FINANCIALACCOUNTING[1]History & Theory of AccountingLecturer: Sam MuliCell: 0700 866 120[email protected]Sam Muli1
Need for InformationInformation needdesire to locate andobtain information to satisfy a conscious orunconscious need(Ref: Robert S. Taylor,(Oct. 1962) “The Process ofAsking Questions” American Documentation , Volume 13, Issue 4, pages 391–396)Needs:a)Explain observed phenomenab) Predict future bevahiourc) Control and improve processes.d)Manage & determine state of resourcesSam Muli2
Types of information• .INFORMATIONQUANTITATIVEINFORMATIONNON-QUANTITATIVEINFORMATIONACCOUNTINGINFORMATIONNON-ACCOUNTINGINFORMATIONSam Muli3OPERATINGINFORMATIONMANAGEMENTINFORMATIONFINANCIALINFORMATION
Cont.1)Operating Info.- Control- Performance Evaluation2)Management Info.-Planning-Implementation-Control-Feedback3)Financial Info.-Record activity-Report performance*Used by Management and OutsidersSam Muli4
Users of Accounting Information1) Investors (Shareholders) – concerns:• - risk• -return- Whether to buy, hold or sell shares- Dividends payout-Future cash flowSam Muli5
Cont’d2) Management-Planning future operations- Future Cash flows- Capital projects- Recruitment etc.Sam Muli6
Cont’d3) Employees –• - profitability;- Liquidity- to pay salaries, pensions- Stability-continued employment4) Lenders-Payment of interest & Principal-Risk profileSam Muli7
Cont’d• 5)Suppliers- Liquidity (mostly short-term)- Stability – for continued business6) Customers- Quality, timely, affordable products- Stability – continued serviceSam Muli8
Cont’d7) Government & agencies- Resource allocation• - Employment• -Taxation- Regulatory compliance8) Public (Society)- Corporate Social Responsibility- Environmental protectionSam Muli9
Accounting - definitiona) The process of identifying, measuringand communicating economic informationto permit informed judgments anddecisions by users of the information.b) The process of recording, classifying,summarizing, analyzing and interpretingfinancial information for decision –makingpurposes.Sam Muli10
Branches of Accounting1) Financial Accounting – for internal &external use.2) Management accounting – formanagement use.3) Other-sub branches – Tax accounting;Human Resource Accounting; CSRAccounting.Sam Muli11
History of Accounting2)Stone-age• ·Period can be divided into two sub-periods:a)Paleolithic (old stone-age) age (2.5m yrs BC – 8,000 BC)·Man was hunter-gatherer.·Began forming social units & develop crude tools.b)Neolithic (New-stone) age (8,000-3,500 BC):·Domestication of animals, Farming• ·Better tools·Communal Village living·No written records. Writing divides the prehistoric man andcivilization.

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