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Principles of Accounting – ICHAPTER ONECHAPTER ONEBASIC CONCEPTS OF ACCOUNTINGBASIC CONCEPTS OF ACCOUNTINGDear learner!In the earlier stage of economic development a business enterprise wasvery often managed by its owner, and the accounting records and reports were usedmainly by the owner /manager in conducting the business. Bankers and other lenders oftenrelied on their personal relationship with the owner rather then on financial statements asthe basic for making loan to business.As business organizations grew in size and complexity, managers and outsiders becamemore clearly differentiated. From outsiders, which includes owners, creditors,government, banks, customers, and the public demanded for accurate financialinformation on the basis of which they could judge the performance of management? Inaddition, as the size and complexity of the business unit increased, the accountingproblems involved in the issue of financial statements became more and more complex.Along with these developments came an awareness of the need for a conceptualframework and generally accepted accounting principles that could serve as guidelines forpreparing basic financial statements. In this unit, you will study the principles andconcepts of accounting.OBJECTIVESOBJECTIVESAfter studying this chapter you should be able toAfter studying this chapter you should be able toa) Describe the functions and accounting performed by accountants.a) Describe the functions and accounting performed by accountants.a)a)Define the career opportunities in accountingDefine the career opportunities in accountingb)b)Identify and describe the three basic forms of business organizations.Identify and describe the three basic forms of business organizations.c)c)Identify and describe the users of accounting information.Identify and describe the users of accounting information.d)d)Identify application of accounting conceptsIdentify application of accounting conceptsDEFINITIONDEFINITIONEast Africa University CollegeDistancePage1
Principles of Accounting – IBusiness organizations need good financial information to make good business decision.Business organizations need good financial information to make good business decision.Orderly records of a business financial activities are calledOrderly records of a business financial activities are calledaccounting recordsaccounting records. The. Theprocess of identifying, measuring and communicating financial and economic informationprocess of identifying, measuring and communicating financial and economic informationto permit informed judgments and decisions by the users of the information,to permit informed judgments and decisions by the users of the information,Specifically, the accounting process (also called accounting cycle) consists of theSpecifically, the accounting process (also called accounting cycle) consists of thefollowing group of functions.following group of functions.

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Balance Sheet, Generally Accepted Accounting Principles, East Africa University College

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