ACCOUNTING BASISLECTURE 1

LEARNING OBJECTIVES

A ti A I f ti t• Accounting – An Information system• History of accounting

U f A ti I f ti• Users of Accounting Information• Role of accounting

T f ti• Types of accounting

Accountingg

- a process of identifying, di i i d recording, summarizing, and

reporting economic information to decision makersmakers.

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ACCOUNTING –THE LANGUAGE OF BUSINESS

Accounting is the information system that...Accounting is the information system that...

measures business activities,

processes data into reports, and

communicates results to decision makers.communicates results to decision makers.4

The primary objective of The primary objective of accounting is to provide g puseful information for

d i i kdecision makers.

ACCOUNTING INFORMATION SYSTEM

INPU OUTPUProcess to: Analyze

T TRecordSummarizeReportReport

A HISTORY OF ACCOUNTING

Account records date back to theAccount records date back to the ancient civilizations of China, Babylonia, Greece, and Egypt.y gypThe rulers of these civilizations used accounting to keep track of the cost of labour and materials used in building structures like the great pyramids.

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Accounts Table with Cuneiform

S i tScript, circa 2400 BC

by Mesopotamian y pBookkeeper

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A HISTORY OF ACCOUNTING

Accounting developed further as a result of the g pinformation needs of merchants in the city-states of Italy during the 1400s.Th k L P i li th ti i d f i d fThe monk Luca Pacioli, a mathematician and friend of Leonardo da Vinci, published the first known description of double-entry bookkeeping in 1494.

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A HISTORY OF ACCOUNTING

In the Industrial Revolution of the nineteenthIn the Industrial Revolution of the nineteenth century, the growth of corporations spurred the development of accounting.The corporation owners—the shareholders—were no longer necessarily the managers of their business.Managers had to create accounting systems to

h h ll hreport to the owners how well the company was performing

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HISTORY OF ACCOUNTING IN MONGOLIA

1911 . Governing by Bogd Khan1924 -1964.Memorial order1964-1990 . Journal order1993 . Law of “Accounting “.

ROLE OF ACCOUNTING

InformationControlManaging

fTypes of accounting

Financial accounting

Cost and management

Tax accountingaccounting g

accounting

DIFFERENCEDIFFERENCE

Financial accounting

Managementaccountingg g

Primary users External users Internal usersPurpose of Help Help managers pinformation

pinformation users make decision

p gplan and control business operationsdecision operations

Timing Information about past

Information about future p

performance performanceType of report Financial

t t tInternal reports

t g l t d b statementsregulated by GAAP

not regulated by GAAP

Users of Accounting InformationUsers of Accounting InformationUsers of Accounting InformationUsers of Accounting Information

investors• investorsdicreditors

regulatorsEXTERNAL USERS

• creditors• regulators• customers

customerscompetitors

• competitors

s

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Users of Accounting InformationUsers of Accounting InformationUsers of Accounting InformationUsers of Accounting Information

• investorsC di

EXTERNAL USERS

• Creditors• Regulators • Customers

owners• Ownersmanagersemployees

INTERNAL USERS • Managers• Employees

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GAAP- Generally accepted accounting principlesy p g p pThe FASB currently sets accounting standards. IAS -40 standardsIFRS-8 standardsLaws in Mongolia in field of accounting:

Accounting lawAudit lawT lTax laws

Organizations That constitute the body of GAAP in g yMongolia.Ministry of FinanceMongolian Institute of Certified Public Accountants

FORMS OF BUSINESS ORGANIZATION

Sole proprietorshipp p pPartnershipCorporation

BUSINESS ACTIVITY

InvestinggFinancingOperating