Accounting

What is accounting?

 Accounting uses the records of the book-keepers to prepare the financial statements of the
business

 Accountants provide information to owners and managers which is used to

o monitor progress of the business

o help with decision making about how to improve profit or reduce loss

 Accounting is the function carried out by accountants

o Accountants are primarily responsible for managing, updating, correcting, and reporting
the business' accounts

What is the difference between accounting and book-keeping?

 Accounting and book-keeping have distinct functions

 They support businesses at different stages of the financial cycle

o Book-keeping involves keeping records of the day-to-day financial data of the business

o Accounting involves using the information recorded by the book-keeper to provide

information at regular intervals

 CASE STUDY
 Barbara runs a burger bar called Barbara's Burger Bar. She hires Jack as an
accountant for her business. Jack runs his own accounting firm, 4J Accounting,
with three other partners: James, Jasmin and Junaid.
 Jack visits Barbara's place of business and explains to her the types of financial
transactions he would like her to record as well as the rules and procedures for
Barbara to follow in recording these transactions.
 Barbara carries out all of the book-keeping of the business.
 After Barbara completes the book-keeping, Jack takes the records and puts them
to use. He transforms the records Barbara has collected in a way that can be
used for decision making. He creates financial statements which can be used to
see where the business is spending its money, where it is making money, and
the financial health of the burger bar. Jack will also conduct tax preparations and
tax planning.