What Is Accounting

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Introduction to Accounting > What Is Accounting?
What Is Accounting?
Defining Accounting
Inputs to Accounting
Outputs of Accounting
Uses of Financial Reports
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Defining Accounting
Accounting is thousands of years old; the earliest accounting records, which date
back more than 7,000 years, were found in Mesopotamia (Assyrians).
Luca Pacioli's "Summa de Arithmetica, Geometria, Proportioni et Proportionalit"
represents the first known printed treatise on bookkeeping; and it is widely
believed to be the forerunner of modern bookkeeping practice.
Double-entry bookkeeping is defined as any bookkeeping system in which there
was a debit and credit entry for each transaction.
Token Accounting in Mesopotamia

View on Boundless.com
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-109-10922
Inputs to Accounting
In accounting, a journal entry is a logging of transactions into accounting journal
items.
The extraction of account balances is called a trial balance.
The purpose of the trial balance is, at a preliminary stage of the financial
statement preparation process, to ensure the equality of the total debits and
credits.
The Balance Sheet

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Outputs of Accounting
The balance sheet, reports on a company's assets, liabilities, and ownership
equity at a given point in time.
The income statement is also referred to as profit and loss statement, or a "P&L."
This statement reports on a company's income, expenses, and profits over a
period of time.
A statement of changes in shareholder's equity explains the changes of the
company's equity throughout the reporting period.
A Sample Income Statement

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g-111-3565
Uses of Financial Reports

Owners and managers require financial statements to make important business
decisions that affect its continued operations.
Employees also need these reports in making collective bargaining agreements
with the management, in the case of labor unions or for individuals in discussing
their compensation, promotion, and rankings.
Although laws differ from country to country, an audit of the financial statements
of a public company is usually required for investment, financing, and tax
purposes.
Auditing Firm
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orts-112-6832
Appendix
Introduction to Accounting
Key terms
auditor A person who audits (reviews and examines) bookkeeping accounts
bookkeeper A person responsible for keeping records or documents, such as of a business.
bookkeeping The skill or practice of keeping books or systematic records of financial transactions, e.g., income and expenses.
creditworthiness The property of being creditworthy, when a person is deemed likely to repay debts and / or has an acceptable
credit rating
debenture A certificate that certifies an amount of money owed to someone; a certificate of indebtedness.
journal a book or computer file in which monetary transactions are entered the first time they are processed
journal entry A journal entry, in accounting, is a logging of transactions into accounting journal items.The journal entry can
consist of several items, each of which is either a debit or a credit.The total of the debits must equal the total of the credits or
the journal entry is said to be "unbalanced." Journal entries can record unique items or recurring items, such as depreciation or
bond amortization.
ledger A collection of accounting entries consisting of credits and debits.
A Sample Income Statement

Expenses are listed on a company's income statement.
Flickr. "All sizes | y2cary3n6mng-5ha51l-income-statement-example | Flickr - Photo Sharing!." CC BY-SA http://www.flickr.com/photos/sampjb/7690678408/sizes/l/
Journals to Ledgers
The general ledger works as a central repository for accounting data transferred from all sub-ledgers or modules like accounts payable, accounts
receivable, cash management, fixed assets, purchasing, and projects.
Flickr. "All sizes | y2cary3n6mng-2vdahw-postinginaccounting | Flickr - Photo Sharing!." CC BY-SA http://www.flickr.com/photos/sampjb/7690678958/sizes/o/
Bookkeeping
Bookkeeping is the recording of financial transactions, includng sales, purchases, income, receipts and payments by an individual or organization.
Creative Commons. "Creative Commons Attribution 2.0 Generic CC BY 2.0 ." CC BY http://creativecommons.org/licenses/by/2.0/ View on Boundless.com
Auditing Firm
Auditing firm office building in San Francisco.
Wikipedia. "Downtown Los Angeles Skyscrapers-edit1 (cropped)." Public domain
http://en.wikipedia.org/wiki/File:Downtown_Los_Angeles_Skyscrapers-edit1_(cropped).jpg View on Boundless.com
Token Accounting in Mesopotamia

The invention of a form of bookkeeping using clay tokens represented a huge cognitive leap for mankind.
Wikipedia. "Accounting." Public domain http://en.wikipedia.org/wiki/Accounting View on Boundless.com
Father of Double-Entry Accounting

Portrait of Luca Pacioli, attributed to Jacopo de' Barbari, 1495 (Museo di Capodimonte).
Wikipedia. "Accounting." Public domain http://en.wikipedia.org/wiki/Accounting View on Boundless.com
Accounting, bookkeeping and auditing represent:
A) the three fields of accounting
B) the three divisions of accountancy
C) the three accounting practices
D) the three major branches of accounting
Accounting, bookkeeping and auditing represent:
A) the three fields of accounting
B) the three divisions of accountancy
C) the three accounting practices
D) the three major branches of accounting
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
The most common way to communicate financial information

about business entities is with:
A) bank statements
B) accountancy
C) financial statements
D) shareholder meetings
The most common way to communicate financial information

about business entities is with:
A) bank statements
B) accountancy
C) financial statements
D) shareholder meetings
Today, accounting is called:
A) the backbone of business
B) the art of business
C) the language of business
D) the guideline for business
Today, accounting is called:
A) the backbone of business
B) the art of business
C) the language of business
D) the guideline for business
If a journal entry is "unbalanced", what does it mean?
A) debits equal credits
B) there are two credit entries
C) there are two debit entries
D) debits do NOT equal credits
If a journal entry is "unbalanced", what does it mean?
A) debits equal credits
B) there are two credit entries
C) there are two debit entries
D) debits do NOT equal credits
Statement of financial position and statement of income are

derived from:
A) the journal entries
B) the general ledger
C) the financial statements
D) the special journals
Statement of financial position and statement of income are

derived from:
A) the journal entries
B) the general ledger
C) the financial statements
D) the special journals
What is the foundation of the double entry bookkeeping system?
A) credits and debits
B) the T-account
C) the basic accounting equation
D) the general ledger
What is the foundation of the double entry bookkeeping system?
A) credits and debits
B) the T-account
C) the basic accounting equation
D) the general ledger
What statement would you read if you wanted to know the

changes in a company's equity throughout the reporting period?
A) statement of shareholder's equity
B) statement of cash flows
C) income statement
D) balance sheet
What statement would you read if you wanted to know the

changes in a company's equity throughout the reporting period?
A) statement of shareholder's equity
B) statement of cash flows
C) income statement
D) balance sheet
The income statement is also known as:
A) statement of cash flow
B) revenue report
C) statement of cash position
D) the profit and loss statement
The income statement is also known as:
A) statement of cash flow
B) revenue report
C) statement of cash position
D) the profit and loss statement
The financial statements should be:
A) understandable
B) all of these answers
C) relevant
D) comparable
The financial statements should be:
A) understandable
B) all of these answers
C) relevant
D) comparable
Which one of these is an example of when employees would use

a company's financial statements?
A) before making a collective bargaining agreement
B) before discussing a raise
C) all of these answers
D) before deciding whether to work for a company or not
Which one of these is an example of when employees would use

a company's financial statements?
A) before making a collective bargaining agreement
B) before discussing a raise
C) all of these answers
D) before deciding whether to work for a company or not
Which one of these is NOT an organization that would review the

financial reports of a business?
A) potential creditors
B) potential investors
C) current shareholders
D) rival companies
Which one of these is NOT an organization that would review the

financial reports of a business?
A) potential creditors
B) potential investors
C) current shareholders
D) rival companies
Attribution
Wikipedia. "Financial statement." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_statement
Wiktionary. "debenture." CC BY-SA 3.0 http://en.wiktionary.org/wiki/debenture
Wikipedia. "journal entry." CC BY-SA 3.0 http://en.wikipedia.org/wiki/journal%20entry
Wikipedia. "Accounting equation." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Accounting_equation
Wikipedia. "Bookkeeping." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Bookkeeping
Wikipedia. "Journal entry." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Journal_entry
Wikipedia. "General ledger." CC BY-SA 3.0 http://en.wikipedia.org/wiki/General_ledger
Wikipedia. "Journal." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Journal
Wiktionary. "bookkeeper." CC BY-SA 3.0 http://en.wiktionary.org/wiki/bookkeeper
Wiktionary. "creditworthiness." CC BY-SA 3.0 http://en.wiktionary.org/wiki/creditworthiness
Wikipedia. "Financial statement." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Financial_statement
Wikipedia. "Accounting." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Accounting
Wiktionary. "ledger." CC BY-SA 3.0 http://en.wiktionary.org/wiki/ledger
Wiktionary. "bookkeeping." CC BY-SA 3.0 http://en.wiktionary.org/wiki/bookkeeping

What Is Accounting

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Introduction to Accounting > What Is Accounting?

Introduction to Accounting > What Is Accounting?

Token Accounting in Mesopotamia

Introduction to Accounting > What Is Accounting?

The Balance Sheet

Introduction to Accounting > What Is Accounting?

A Sample Income Statement

Introduction to Accounting > What Is Accounting?

Uses of Financial Reports

A Sample Income Statement

Token Accounting in Mesopotamia

Father of Double-Entry Accounting

Accounting, bookkeeping and auditing represent:

A) the three fields of accounting

B) the three divisions of accountancy

C) the three accounting practices

D) the three major branches of accounting

Accounting, bookkeeping and auditing represent:

A) the three fields of accounting

B) the three divisions of accountancy

C) the three accounting practices

D) the three major branches of accounting

The most common way to communicate financial information

The most common way to communicate financial information

Today, accounting is called:

A) the backbone of business

B) the art of business

C) the language of business

D) the guideline for business

Today, accounting is called:

A) the backbone of business

B) the art of business

C) the language of business

D) the guideline for business

If a journal entry is "unbalanced", what does it mean?

A) debits equal credits

B) there are two credit entries

C) there are two debit entries

D) debits do NOT equal credits

If a journal entry is "unbalanced", what does it mean?

A) debits equal credits

B) there are two credit entries

C) there are two debit entries

D) debits do NOT equal credits

Statement of financial position and statement of income are

B) the general ledger

C) the financial statements

D) the special journals

Statement of financial position and statement of income are

B) the general ledger

C) the financial statements

D) the special journals

What is the foundation of the double entry bookkeeping system?

A) credits and debits

C) the basic accounting equation

D) the general ledger

What is the foundation of the double entry bookkeeping system?