FIRST YEAR ACCOUNTING PRINCIPLES AMR YOUSSEF

PART (1)

ACCOUNTING PRINCIPLES
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‫تعتبر مادة المحاسبة هي المادة األهم في كلية التجارة وهي المادة يترتب‬
‫عليها كل المراحل الدراسية في الكلية بإختالف اقسامها ‪ ،‬ال يجب ترك‬
‫المحاسبة إلى قبل االمتحان خاصًة مادة الفرقة األولى ألنها تعتبر اساس‬
‫‪.‬البناء للمحاسبة‬
‫يرجي متابعة جروب الفيسبوك‬
‫‪www.facebook.com/groups/AY.Accounting‬‬

‫اعادة شرح ‪Part 1‬‬

‫‪Sunday 2/10‬‬ ‫‪2:00 PM‬‬

‫من لديه ظروف مادية لن تمكنه من الدفع يرجى إبالغنا‬

‫!‪GOOD LUCK‬‬
‫‪Amr Youssef‬‬
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ACCOUNTING PRINCIPLES
Chapter (1) Accounting
Chapter (2) Recording Process
Chapter (3) Adjusting The Accounts
Chapter (4) Completing the Accounting Cycle

Chapter (5) Accounting for Merchandising

……………………………………………………
…

GOOD LUCK!
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Chapter (1)
ACCOUNTING
:Organization (Business)
A business organization is an individual or group of people that are
.working together to achieve commercial goals

FORMS OF BUSINESS
SOLE
PARTNER
PROPRITERSH CORPORATIONS
SHIP
IP
A business owned by two or A business owned by very
A business owned by one
more persons large (millions) number of
person
( 2 , 3 , …. ) Partners owners (stockholders)

Subject:
Subject: Subject: Intermediate Accounting
Accounting Principles Companies Accounting Corporations Accounting

TYPES OF BUSINESS ACTIVITIES

SERVICE MANUFACTURIN MERCHANDSING

BUSINESS G BUSINESS BUSINESS
Purchase then Sell Tangible Products
Provide Services & Collect The Business Purchase Raw Material
(Goods) to Customers &Collect Cash
Cash Like ( Gym , Café , & Convert them to Finished Goods
without changing their form Like
Computer Services , You will Study this Category in Cost
( Carrefour , Fathallah , Kheir Zaman ,
Lawyer Office , etc. .. ) Accounting Subject
Metro Market , Car Dealers , etc .. )

Regardless The form & The activity of the business

we need Accounting.
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ACCOUNTING:
Accounting is an Information System That
Identify , Record & Communicate Financial
Information to the Interesting Users.
 Three Activities of Accounting:
1- Identify 2- Record 3- Communicate Financial
Information.

 The main objective of Accounting is to provide useful information.

Who use This information? (users) -

Internal Users External Users
- Managers - Owners
- Marketing Manager - Investors
- Finance Department - Creditors
- HR Department - Government
- Any Other Department - Others
(Managerial Accounting) (Financial Accounting)

- What is The Financial Information?

Financial Information (Transactions) means the economic events that occurs in
the organization such as :
- Purchasing Truck for business.
- Provide Service to the Customers.
- Paying Utilities Expense.

-Accounting Department & Accountants:

Accounting Department: The staff members (Accountants)
of a company or office who deal with accounting.
Accountants: An accountant is a professional person who performs
accounting functions.
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 R E M E M B E R : Three Activities of Accounting:

1- Identify 2- Record 3- Communicate Transactions.

- How Accountants 1- Identify Transactions?

By Analysing the Transactions According to The Accounting Equation. (PART 2)
- How Accountants 2- Record Transactions?
By Recording the Transactions According in The Accounting Books. (PART 3,4)
- How Accountants 3- Communicate Transactions?
After Identifying & Recording Business Transactions Accountants provide
information (main objective) to the users by preparing set of Financial Reports after
a specific period of time called “Accounting Period” (monthly, quarterly, annually)
According to the system of the business.
The Financial Statements. (PART 5)
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 R E M E M B E R : The main objective of Accounting is to provide useful information by

preparing financial statements to the users.

FINANCIAL STATEMENTS
Accountants should provide Financial Reports to users after
end of each Accounting Period. (monthly, quarterly, annually)
1- INCOME STATEMENT
2- OWNER’S EQUITY STATEMENT
3- STATEMENT OF FINANCIAL POSITION “BALANCE SHEET “
4- CASH FLOW STATEMENT

 Financial Statements must be prepared according to Accounting Standards.

THE ACCOUNTING STANDARDS

The accounting profession has developed standards that are generally accepted and universally
practiced. This common set of standards is called Generally Accepted Accounting Principles (GAAP)
These standards indicate how to report the Transactions. These Standards are issued by FASB , The
Accounting Standards Contains set of Principles & Assumptions ,
The Accounting Standards considered as a Constitution for Accountants.

SOME CONCEPTS IN GAAP

1- GOING-CONCERN ASSUMPTION:
refers , that the business (organization) will have a long life continue operating & will not be closed or sold.

2- ECONOMIC ENTITY ASSUMPTION:

requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other
economic entities.

3- TIME PERIOD ASSUMPTION :

refers , that the life of a company must be divided into time periods called “Accounting Period” , such as
( Monthly , Quarterly , Annually )

4- MONETARY UNIT ASSUMPTION:

only transaction data that can be expressed in money terms. This assumption enables accounting to measure
economic events (Transactions) .

5- HISTORICAL COST PRINCIPLE:

dictates that companies record long term “Fixed “ assets (Land, Building, Car , Equipment) at their original cost.
“Ignore New Price , The Market Value”
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NOTE: Many countries outside of the United States have adopted the accounting
standards issued by the International Accounting Standards Board (IASB). These
THE BASIC ACCOUNTING standards are called
International Financial Reporting Standards (IFRS) .
EQUATION
ASSETS = LIABILIITES + OWNER’S
EQUITY

Assets: resources owned by the Business.

- Cash , Supplies , Inventory , Land , Building , Furniture , Equipment,
Account Receivable (AR) , Note Receivable (NR).

Liabilities: claims against assets , Obligations.

- Bank Loan , Accounts Payable (AP) , Note Payable (NP).

Owner’s Equity: right of owners in business ,

capital of the business.
+ INC Investments by Owner (resources owner puts into business)
+ INC Revenue (cash coming from sales or providing service)
- DEC Expenses (Expired Benefit to Business: Salaries ,Rent , Utilities , Ins , Adv...)
- DEC Drawings (withdrawals by owner for his personal use )
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EX1: Indicate whether each of the statements presented below is true or false.
1. The three steps in the accounting process are identification “Organizing”, recording,
and communication.

2. The two most common types of external users are investors and company officers.

3. The Historical cost principle dictates that companies record assets at their cost. In later
periods, however, the market value of the asset must be used if market value is higher
than its cost.

4- The Managers are only people who need accounting.

5- A partnership business form owned by one owner only.

6- The monetary unit concept requires that all assets be recorded by purchase price

7- Drawings & Investment by Owner increases the owner’s Equity

8- GAAP are established by FASB.

9- The Owner of the business purchased a new car and the accountant record the
transaction according to economic entity assumption.
10- Accountants provide information to users by preparing Financial Statements
11- In Accounting we have 4 Types of Statements “Income Statement, Owners Equity
Statement, Balance Sheet & Cash Flows Statement “

12- Land is recorded only at time of purchase.

13- Accounting Equation is Assets = Liabilities + Owner’s Capital – Drawings + Revenues –
Expenses.
14- Accountants can prepare Financial Statements “Monthly or Quarterly or Annually“
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1- True 2-False 3-False 4-False 5-False 6-False 7-False 8-True

9- False 10- True 11- True 12- True 13- True 14- True

EX2: Indicate whether each of the following items is an asset (A), liability (L), or
part of owner’s equity (OE).

_______(a) Accounts receivable A- A

_______(b) Salaries and wages payable B- L
_______(c) Equipment C- A
_______(d) Supplies D- A
E- OE
_______(e) Owner’s capital F- L
_______(f) Notes payable

EX3: The following situations involve accounting principles and assumptions.

1. AY Company Purchased a Building for $200,000 in 2014, at the end of fiscal

year the Building recorded at $400,000.

2. AY Company includes in its accounting records only transaction data that can be
expressed in terms of money.

3. Amr , owner of AY Company, records his personal living costs as expenses of

the Business in the Income Statement.

REQ:
For each of the three situations, say if the accounting method used is correct or
incorrect. If correct, identify which principle or assumption supports the method used. If
incorrect, identify which principle or assumption has been violated

Quote of the Part:

Oh yes, the past can hurt. But you can either
.run from it, or learn from it
Rafiki - The Lion King

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1- False , Hisotrical Cost Principle 2-True , Monetary Unit Assumption

3- False , Economic Entity Assumption

END OF PART 1
Next Lecture: PART 2
Tuesday 3/10 2:00 or 5:00 pm

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