Summary Introduction to Financial Accounting System

Principles of Accounting – Financial Accounting
System

1. What is Accounting?

- It is the process of recording, classifying, summarizing, analysis and
interpreting financial transactions of a business or organisation.
- Organisations cannot keep all the information in their mind, so the
recording of all transactions is mandatory to keep track of what is
happening in the business. This process is called recording of data.
- When data has been recorded, they have to be organised so as to be most
useful to the organisation. This is called classifying and summarising of
data.
- Classifying is organising the transaction into categories, such as Assets,
Liabilities, Income and Expenses.
- Through this process, the organisation can easily calculate how much profit
or loss has been made during a particular period (financial year).


2. User of the accounting information:
i. Owners
ii. Employees
iii. Suppliers
iv. Customer
v. Lenders
vi. Government
vii. Management
viii. Trade Union
ix. Media
x. Potential Investors
xi. Tax Authorities
xii. Auditors
xiii. Investigators
xiv. General Public




3. Terminology