Facilitator: Rewan DahalEmail: dahalrewan@gmail.comCell no: 98511-36950Financial Accounting**rewan dahal

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Introduction of Accounting*Accounting is a set of concepts and techniques that are used to measure and report financial information about an economic unit.

The information is reported to a variety of different types of interested parties.

The diversity of interested parties leads to a logical division in the discipline of accounting: financial accounting and managerial accounting. * rewan dahal

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Financial Accounting*Financial accounting is concerned with external reporting to parties outside the firm.

Financial Reporting should be standards based on principles and practices.

Standardized reports are intended to be equally useful for all user groups.

Standard-setting bodies are guided by concepts that are aimed at production of relevant and faithful reports.

Standardization derives from certain well-organized processes and organizations.

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Contd.In the United States, a private sector group called the Financial Accounting Standards Board (FASB) is primarily responsible for developing the rules that form the foundation of financial reporting.

The FASBs global counterpart is the International Accounting Standards Board (IASB).

The IASB and FASB are working toward convergence, such that there may soon be a single harmonious set of International Financial Reporting Standards (IFRS).

This effort to establish consistency in global financial reporting is driven by the increase in global trade and finance. * rewan dahal*

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Management Accounting*Managerial accounting is primarily concerned with providing information for internal stakeholders.

Internal stakeholders may desire specialized accounting information for planning, controlling, decision making, organizing, directing etc.

Management accounting information are generally not reported on standardized format.

Internal reporting is being done logically and rationally, but it need not follow any particular set of mandatory guidelines.

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Forms of Organization*Business EntitiesBusiness entities are organized to earn profit. Legally, a profit oriented organization is one of the three types: a sole proprietorship, a partnership, and a corporation.

Non-business Entities Most business entities are organized for a purpose other than to earn a profit. They exist to serve the needs of various segments of society. For example, a government hospital; a municipality, a government school etc.

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Business Activities *Financing ActivitiesInvesting ActivitiesOperating Activities

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Basic Rules for Recording and Posting** rewan dahalSteps in recording processGenerally, every business uses following basic steps in the recording process of business transactions: Analyze each transaction in terms of its effect on the accounts.Enter the transaction information in a journal.Transfer the journal information to the appropriate accounts in the ledger (book of accounts).

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Financial Statements*Financial Statements are official records that document the financial activities of a business. They provide a view into the financial condition as well as the profitability of the business. Financial statements are prepared as part of the accounting cycle. They include:Income Statement (i.e. Trading, Profit &Loss Account)Statement of Retained Earnings (i.e. Profit and Loss Appropriation Account) Balance Sheet (i.e. Statement of Financial Position)Cash Flow Statement* rewan dahal

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Income Statement*A summary of an entitys results of operation for a specified period of time is revealed in the income statement, as it provides information about revenues generated and expenses incurred. The difference between the revenues and expenses is identified as the net income or net loss. For e.g.

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Statement of Retained Earnings *Retained earnings are the portion of net income not paid out to investors in the business as dividends. Retained earnings are reinvested in the business firm. The Statement of Retained Earnings explains the change in the retained earnings account and in dividends over a period of time. For e.g.* rewan dahal

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Balance Sheet*The balance sheet is prepared on the basis of accounting equation by revealing the economic resources owned by an entity and the claims against those resources (liabilities and owners equity). For e.g. * rewan dahal

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Statement of Cash Flow*The statement of cash reveals how cash is generated and expended during a specific period of time. It consists of three unique sections that isolate the cash inflows and outflows attributable to (a) operating activities, (b) investing activities, and (c) financing activities. For e.g.* rewan dahal

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Interrelationship of Financial Statements*The results on some financial statements become inputs to other statements, the statements are interrelated. For e.g.

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Ethics in Accounting*In the modern business world, rapidly changing markets, technological improvements, and business innovation all affect financial decisions.

Decision makers consider information received from many sources, such as other investors in the marketplace, organizations whose corporate officers and executives may be encouraging aggressive accounting and reporting practices.

Business organization may use aggressive accounting practices to misrepresent their earnings; executive may misuse their organizations funds.

Therefore, accounting system must be responsible for making financial reporting decisions that will affect others inside or outside the organization.

Knowledge of the professional standards of accounting procedures will be critical for decision making process.

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The Accounting Profession and Careers*There are many specialty areas in accounting. Many accountants engage in the practice of public accounting, which involves providing audit, tax, and consulting services to the general public. To engage in the practice of public accounting usually requires one to be licensed. In the United States, individual states issue a license called a CPA (Certified Public Accountant). Other countries offer similar designations such as the Chartered Accountant, Registered Auditor etc.

Many accountants are privately employed by small and large businesses (i.e., industry accounting) and not-for-profit agencies (such as hospitals, universities, and charitable groups). They may work in areas of product costing and pricing, budgeting, and the examination of investment alternatives. They may serve as internal auditors, who look at controls and procedures in use by their employer.* rewan dahal

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Professional Ethics*Because investors and creditors place great reliance on financial statements in making their investment and credit decisions, it is imperative that the financial reporting process be truthful and dependable.

Accountants are expected to behave in an entirely ethical fashion.

To help insure integrity in the reporting process, the profession has adopted a code of ethics to which its licensed members must adhere. In addition, checks and balances via the audit process, government oversight, and the ever vigilant plaintiffs attorney all serve a vital role in providing additional safeguards against the errant accountant.

Those who are preparing to enter the accounting profession should do so with the intention of behaving with honor and integrity.

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