CHAPTER 1: FINANCIAL APPLICATIONS
Fundamentals of accounting
Definition of accounting
It is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing,
interpreting and communicating financial information. It reveals profit or loss for a given period, and the
value and nature of a firm's assets, liabilities and owners' equity.
provides information on
Basic Accounting Principles
Accounting assumptions and principles provide the bases in preparing, presenting and
interpreting general-purpose financial statements.
The basic principles that accountants follow include:
Income is recognized when earned regardless of when collected, and expenses are
recognized when incurred regardless of when paid.