CH01_Introduction to Business Accounting (Update)

Page 1: Introduction

Lecturer Background

  • Mr. BAN Sethy

    • Master in Accounting and Auditing

    • Bachelor in Finance

    • ACCA, CPA Candidate

    • KICPAA Affiliate Member

    • Freeland Consultant

Experience

  • Last Position: Deputy Finance Director (2019-2021)

  • Previous Positions:

    • Finance Director at GHG (2018-2019)

    • Accounting Manager at DKSH (Dumex) (2014-2018)

    • Senior Finance Business Partner Analyst at ULC

Page 2: Chapter List

  • Chapter 1: Introduction to Business Accounting

  • Chapter 2: Information Technology and Information Systems in Business

  • Chapter 3: Sources, Records and Books of Prime Entry

  • Chapter 4: Ledger Accounts and Double Entry

  • Chapter 5: Trial Balance to Financial Statements

  • Chapter 6: Inventory

  • Chapter 7: Tangible/Intangible Non-current Assets

  • Chapter 8: Accruals and Pre-payments

  • Chapter 9: Sale Tax

  • Chapter 10: Bad and Doubtful Debts

  • Chapter 11: Bank Reconciliations

  • Chapter 12: Correction of Errors

  • Chapter 13: Preparation of Financial Statement Follow CIFRS for SMEs

Page 3: Introduction to Accounting

  • Topics Covered:

    1. Accounting

    2. Bookkeeping

    3. Business Transactions

    4. The Purpose of Financial Reports

    5. Types of Business Entity

    6. Users

    7. Governance

    8. The Main Financial Statements

Page 4: Understanding Accounting

  • Role of Accounting:

    • Key function in business; handled by

      • Bookkeeper and accountant at small firms

      • Large finance departments in bigger companies

  • Definitions:

    • Accounting: Systematic recording, summarizing, analyzing, and reporting of financial transactions.

    • Purpose: Enables informed judgments and decisions by users through economic information communication.

Page 5: Components of Accounting

  • Key components of Accounting:

    • Bookkeeping:

      • Maintains accounting records of transactions

    • Financial Reporting:

      • Prepares financial statements showing financial position and performance

    • Types of Accounting Information:

      • Management Accounting: For internal management decisions

      • Financial Accounting: For external parties (shareholders, tax authorities, etc.)

Page 6: Bookkeeping

  • Definition and Role:

    • Component of accounting, foundational step.

    • Responsibilities of Bookkeepers:

      • Record all business transactions accurately

      • Use double entry bookkeeping for maintaining financial records

Page 7: Functions of a Bookkeeper

  • Responsibilities:

    • Produce and send sales invoices

    • Record financial transactions (sales and supplier invoices)

    • Maintain and balance general and supporting ledgers

    • Prepare trial balance for financial statement preparation

Page 8: Effective Bookkeeping Attributes

  • Qualities of an Effective Bookkeeper:

    • Responsibility: Accurate information essential to management.

    • Accuracy: Follow proper procedures for recording and processing transactions.

Page 9: Business Transactions

  • Definition:

    • Interaction between a business and other parties (customers, suppliers, etc.)

    • Types of Transactions:

      • Cash and credit sales

      • Payments to suppliers

      • Employee payments

      • Loan proceedings and repayments

      • Asset purchases

Page 10: Purpose of Financial Reports

  • Overview:

    • Record, analyze, and summarize financial data

    • Financial transactions are recorded in books of prime entry and analyzed to produce financial statements

Page 11: Understanding Business Entities

  • Definition of a Business:

    • Exists to generate profit (income exceeds expenses)

  • Types of Business Entities:

    • Sole Traders: Owned and operated by one person, can have employees

    • Partnerships: Two or more individuals running a business

    • Limited Liability Company: Liability limited to investment amount, has separate legal identity from owners

Page 12: Users of Accounts

  • Who are the Users?:

    • Company managers

    • Shareholders

    • Creditors and financiers

    • Tax authorities

    • Employees

    • Financial analysts and advisors

    • Government agencies and the public

Page 13: Governance

  • Corporate Governance:

    • Process by which businesses are directed and controlled

    • Responsibilities include preparing financial statements

Page 14: Main Financial Statements

  • Statement of Financial Position (Balance Sheet):

    • Describes the financial position at a specific date (assets, liabilities, equity)

  • Definitions:

    • Assets: Resources controlled by the business for future economic benefits.

    • Liabilities: Present obligations impacting future economic resources.

Page 15: Current vs Non-current Assets and Liabilities

  • Current Assets vs Non-current Assets:

    • Current assets: benefits expected within 12 months

    • Non-current assets: benefits expected after more than 12 months

  • Equity:

    • Residual interest in the business; assets minus liabilities

Page 16: Statement of Profit or Loss

  • Overview:

    • Record of income and expenses over a specific period

  • Definitions:

    • Income: Increases in economic benefits captured during the accounting period

    • Expenses: Decreases in economic benefits captured during the accounting period

Page 17: Chapter Summary - Part 1

  1. Accounting: Method to record, analyze, and summarize business transactions

  2. Accounting Records: Essential for producing accurate information

Page 18: Chapter Summary - Part 2

  1. Concept of Business Entity: Business exists independently from owners

  2. Types of Business Entities:

  • Sole traders and partnerships have unlimited liability; limited liability companies have restricted liability

Page 19: Chapter Summary - Part 3

  1. Users of Financial Information: Varied users with distinct information needs; investor satisfaction often meets broader needs

  2. Governance: Directing and controlling business activities

Page 20: Chapter Summary - Part 4

  1. Proforma Financial Statements: Compliance with prescribed formats for company statements; sole traders have flexible formats

Page 21: Conclusion

  • Thank You!

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This chapter emphasizes the importance of understanding the different requirements for financial reporting across various business structures, ensuring that all stakeholders can accurately assess financial health. By doing so, businesses can foster transparency, build trust, and make informed decisions that contribute to long-term success. In summary, a solid grasp of accounting principles not only aids in compliance with regulations but also enhances strategic planning and operational efficiency. In conclusion, mastering these accounting fundamentals is essential for anyone looking to navigate the complexities of the business world effectively. Furthermore, ongoing education and practice in accounting will empower individuals to adapt to evolving financial landscapes and maintain a competitive edge.