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    Lecture 1-Introduction To Accounting

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    Lakshman Wijayarathna
    This document provides information about an accounting module, including the lecturer's details, class rules, course outline, assessment criteria, and recommended textbooks. It introduces accounting concepts such as the definition of accounting, its objectives, users of financial statements, the financial and management accounting branches, and different forms of business organizations including sole proprietorships, partnerships, private and public limited companies. It also discusses the environment of accounting and agency theory.

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    Lecture 1-Introduction To Accounting

    Uploaded by

    Lakshman Wijayarathna
    26 views34 pages
    This document provides information about an accounting module, including the lecturer's details, class rules, course outline, assessment criteria, and recommended textbooks. It introduces accounting concepts such as the definition of accounting, its objectives, users of financial statements, the financial and management accounting branches, and different forms of business organizations including sole proprietorships, partnerships, private and public limited companies. It also discusses the environment of accounting and agency theory.

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    Lecture 1-Introduction to Accounting

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    This document provides information about an accounting module, including the lecturer's details, class rules, course outline, assessment criteria, and recommended textbooks. It introduces accounting concepts such as the definition of accounting, its objectives, users of financial statements, the financial and management accounting branches, and different forms of business organizations including sole proprietorships, partnerships, private and public limited companies. It also discusses the environment of accounting and agency theory.

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    26 views34 pages

    Lecture 1-Introduction To Accounting

    Uploaded by

    Lakshman Wijayarathna
    This document provides information about an accounting module, including the lecturer's details, class rules, course outline, assessment criteria, and recommended textbooks. It introduces accounting concepts such as the definition of accounting, its objectives, users of financial statements, the financial and management accounting branches, and different forms of business organizations including sole proprietorships, partnerships, private and public limited companies. It also discusses the environment of accounting and agency theory.

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    Accounting

    Module Code-BM0010

    Lecturer In-Charge – Ms. Chalani Kuruppu


    MLRHRM-UOC, BBA( Hons) in Business Management (UK)
    Email: chalani.k@sliit.lk
    Class Rules
     Be on time.
     Attend all lecture sessions.
     No talking during lectures and do not shout in the corridor
    during the interval.
     Mobile phones must remain switched off during class.
     Aim to submit your assignments before the deadline.
     Any type of plagiarism is not allowed.
     Ask questions. Make use of office hours.
     Do your homework. Study regularly.
    Course Outline
    1. Introduction to Accounting

    2. Accounting Equation

    3. Basic Principles and Concepts of Accounting


    4. Double Entry System
    5. Prime Entry Books

    6. Adjustments to Final Accounts


    7. Preparation of Sole Trader Final Accounts
    Recommended textbooks:
    • Hema Wijewardene – Financial Accounting in Sri Lanka. (Wijaya
    Publishing).
    • Frank Wood and Alan Sangster-Business Accounting 1-11th Edition-
    (Pearson Education Asia).
    • Frank Wood and Alan Sangster-Business Accounting 2-11th Edition-
    (Pearson Education Asia).
    • Financial Accounting Course Manual and other study materials provided
    by any other professional Accounting Bodies
    Assessment Criteria
    Midterm Examination (1Hour) -40%
    Final Examination (3Hours) -60%
    TOTAL 100%
    Let us begin the journey

    You can do it.....


    Introduction to Accounting
    Ms.Chalani Kuruppu
    MLRHRM (Reading) UOC, BBA( Hons) in Business Management (UK)
    Learning outcomes

    • Identify the definition of accounting

    • Understand the environment of accounting


    • Identify the different branches of Accounting and
    Finance
    • The function and the difference between various
    forms of business organizations
    • Agency Theory
    Definition of Accounting

    “The process of identifying, measuring and


    communicating economic information to permit
    informed judgments and decisions by users of the
    information ”
    - American Accounting Association
    Objective of accounting

    The main objective is to provide useful


    information about the firm’s financial position and
    performance to stakeholders through financial
    statements.
    Users of financial statements
    • Owners/Shareholders
    • Management
    • Employees
    • Suppliers

    • Customers
    • Lenders
    • Government

    • Potential Investors
    • General Public
    The Environment of Accounting
    Business Environment Regulatory Environment
    • Types of Business • Company Law
    • Forms of Business • Stock Exchange Listing
    SOCIETY requirements
    • Accounting Standards

    Business Regulatory
    Environment Environment

    Accounting

    International
    Int’nal Environment Environment
    • Int’nal Acc Standards
    • Globalization
    Branches of Accounting

    Branches of Accounting

    Financial Accounting

    Management Accounting
    Financial Accounting

    The process which classifies and records monetary


    transactions of an entity in accordance with
    established concepts, principles, accounting
    standards and legal requirements.
    Management Accounting
    The process of identification, measurement,
    accumulation, analysis, preparation, interpretation and
    communication of information used by management to
    plan, evaluate and control within an entity and to assure
    appropriate use of and accountability for the resources.
    Activities in Financial Accounting
    • Identifying
    • Measuring
    • Recording

    • Classifying
    • Summarising
    • Interpreting
    • Communicating
    Process of Financial Accounting
    • Source document

    • Day Books / Journals

    • Ledger (Accounts)

    • Trial Balance

    • Financial Statements : Trading and Profit & Loss A/c, Balance


    Sheet

    • Interpretation of Financial Statements : Ratio Analysis


    Bookkeeping
    Definition:
    Recording of monetary transactions, appropriately
    classified in the financial records of an entity, either
    manual means or otherwise.
    Exercise :

    Identify the limitations of Financial Accounting


    What is a business organization?

    A business organization is a group of people working


    together to satisfy human needs and wants by
    producing goods and services with a common
    objective of profit maximization.
    Principal forms of business
    organizations

    • Sole proprietorship

    • Partnerships
    • Companies

    • Non-profit making organizations


    Sole proprietorships
    • The most simple and common form of business.

    • Owned and control by an individual.


    • The law basically treats the business and the owner as
    one and the same ( no legal personality).
    • Personally liable for all debts or losses (unlimited
    liability).
    • The business carried on its’ own name.
    Sole proprietorships

    Advantages ???

    Disadvantages???
    Partnerships
    • A partnership is an agreement between two or more
    persons to operate a business(2-20)

    • Partners should formulate an agreement to make


    decisions on:
    - How profits and losses are to be shared among the
    partners.
    - How much money they should invest to the business
    - Their responsibilities in the management

    • No legal personality
    • Partners are personally liable for business debts
    (unlimited liability)

    • Partnership dissolves when a partner dies or the


    expiration of the specified time period.

    • Widely used for small businesses and professional


    practices

    Advantages???

    Disadvantages???
    Companies

    • Companies limited by shares


    • Companies limited by guarantee
    • Companies with unlimited liability
    Limited Companies
    • These organizations should incorporate under the
    ‘Companies Act no 07 of 2007’.

    • The liability of the shareholders of a corporation is


    limited to the amount of their capital contribution

    • The Company has a separate legal personality

    • The Companies can raise more funds

    • Separation of ownership and management

    • Perpetual life
    Types of Limited Companies
    Limited
    Companies

    Private Limited Public Limited


    Companies Companies
    Private Limited Companies
    • Maximum 50 shareholders and should consist at least
    one director
    • No shares can be offered for sale to the general public
    • Consent of all shareholders is required to transfer
    shares to a new shareholder
    • Not allowed to raise funds by issuing debentures
    • The last two words of the name should be read as either
    “(Private) Limited” or “(Pvt) Ltd”
    Public Limited Companies

    • No limit to the maximum number of shareholders and should


    consist at least two directors.
    • Can offer shares for sale to the general public
    • No restriction on the transferability of shares, if listed in the
    CSE.
    • Allowed to raise funds by issuing debentures
    • The last word of the name should be read as either as “Public
    Limited Company” or “PLC” if the company is a listed
    company. If not the name should be as “Limited” or (‘LTD’)
    Advantages ???

    Disadvantages ???
    Agency problem ????

    Shareholders elect a
    Board of Directors

    Board of Directors then hire


    Management (Officers)
    Recommended Text

     Financial Accounting in Sri Lanka-Chapter1 (23pg-41pg)

     Frank Wood’s Business Accounting 1


    END

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