Chapter 01 - EXCEL BOOKS 1-1 Chapter1 Financial Accounting...

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    Chapter 1 Financial Accounting: An introduction EXCEL BOOKS 1-1
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Accounting and Financial Reporting Accounting refers to systematic recording, classifying and summarizing of financial transactions and interpreting the results thereof. Thus, accounting encompasses financial reporting. Accounting starts with recording and ends with presentation of financial information in a manner that facilitates informed judgments and decisions by users. Financial Accounting: An introduction 1-2
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Functions of Accounting System Internal routine reporting to managers for cost planning and cost control of operations, and performance evaluation of people and activities. Internal routine reporting to managers on the profitability of products, brand categories, customers etc. Internal non-routine reporting to managers for strategic and tactical decisions. External reporting through financial statements. Financial Accounting: An introduction 1-3
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Identify a transaction Record in Primary Books Record in Secondary Books Prepare Trial Balance Prepare Financial Statements Accounting Trail Recording Reporting Financial Accounting: An introduction 1-4
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Events and Transactions An event is a happening of consequence to an entity. An event could be an internal happening or external happening. External events that involve transfer of value ( in monetary terms) between two entities (within or outside) are called transactions. Thus, a transaction is an external event that affects the financial position of an entity. Financial Accounting: An introduction 1-5
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Recording of Transactions: The  Double Entry Principle Each transaction has two aspects (or side): Debit and Credit . Every debit has an equal and opposite credit. Each transaction should be recorded in such a way that it affects two sides- debit and credit- equally. Thus, the first and foremost step in recording a transaction is to identify the debit and credit elements. Financial Accounting: An introduction 1-6
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Basic Accounting Concepts An understanding of accounting concepts is vital to understand the process of accounting.
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