Principles of Accounting I: Financial Accounting• Provides an introduction to the key concepts and applications of financial accounting.• Lays the groundwork for the second semester course Principles of Accounting II:Management AccountingSession 1: Introduction to Financial Accounting/ The Balance SheetAfter this lesson, you should be able to:• Explain how accounting information of the balance sheet• Describe the composition of the balance sheet• analyze business transactions and relate them to changes in the balance sheetIntroduction to Financial Accounting:Definition of Accounting:-Accounting is the process of identifying, recording, summarizing, and reportingeconomic information for decision makers.-Accountants present this information in reports, for instance, financial statements.Decision Makers use accounting information:Financial Accounting provides information mainly forexternaldecision makers:-Shareholders of the company (the company’s owners) ant to assess how well itsmanagement is performing to know whether to invest in the company or not.-Trade contacts include suppliers who provide goods for the company on credit andcustomers who purchase the goods or services provided by the company.-Providers of financing to the company might include a bank which allows thecompany to operate an overdraft or provides longer-term finance by granting a loan.-The taxation authorities want to know about business profits in order to assess thetax payable by the company, including sales taxes.-Employees of the company should have a right to information about the company’sfinancial situation, because their future careers and the size of their wages andsalaries depend on it.-Financial analysts and advisers need information for their clients or audience.-Government and their agencies are interested in the allocation of resources andtherefore in the activities of business entities.= Should I invest in the business? Is the business profitable? Should we lend money to thebusiness? Can the business pay us back?Management Accounting provides information to internal decision makers:-Top executives-Department heads-College deans-Hospital administrators-Other managers within the organizations
= How much money should the business budget for production? Should the business expandto a new location? How do actual costs compare to budgeted cost?