Introduction to

Accounting
Accounting is the process of recording, classifying, and summarizing financial
transactions. Its purpose is to provide financial information for decision-making.

by Mary Lutin
Importance of Accounting
Accounting is essential for businesses and individuals alike.

1 Financial Planning 2 Investment Decisions

It helps you set financial goals, track your Accounting provides financial information to
progress, and make informed decisions. investors and creditors so they can make
informed investment decisions.

3 Tax Compliance 4 Performance Measurement

It helps ensure that you are complying with tax Accounting provides insights into the
regulations and paying the correct amount of profitability and financial health of a business.
taxes.
Fundamental Accounting Principles
There are several fundamental accounting principles that guide the accounting process.

Accrual Accounting Matching Principle Going Concern

Revenue and expenses are Expenses are matched with the The business is assumed to be
recognized when earned and revenues they generate in the able to operate in the foreseeable
incurred, regardless of when same accounting period. future.
cash is received or paid.
Financial Statements
Financial statements provide a summary of a business's financial position, performance, and cash flows.

Balance Sheet Statement of Financial Position

Income Statement Statement of Operations

Statement of Cash Flows Cash Flow Statement

Accounting Cycle
The accounting cycle is a series of steps that businesses follow to record and summarize their financial transactions.

Source Documents
Original records of transactions, such as
invoices, receipts, and purchase orders.
Posting
Transferring journal entries to the ledger, a
collection of accounts that summarize
financial transactions.
Financial Statements
Preparing the balance sheet, income
statement, and statement of cash flows.
1
2 Journalizing
Recording transactions in the journal, a
chronological record of financial
3 transactions.
4 Trial Balance
A list of all accounts with their debit and
credit balances, ensuring the accounting
5 equation is balanced.
Cost Accounting
Cost accounting focuses on the cost of producing goods and services, helping businesses make better
decisions.

Direct Costs Indirect Costs

Costs directly associated with the Costs not directly related to production,
production of goods or services, such as such as rent, utilities, and administrative
raw materials and labor. expenses.

Cost Allocation
Assigning indirect costs to products or services based on a predetermined formula or method.
Budgeting and Forecasting
Budgeting and forecasting are crucial for financial planning and control.

Budgeting
A detailed plan that outlines expected revenues and expenses over a specific period.

Forecasting
Predicting future financial performance based on historical data, market trends, and
other relevant information.

Analysis & Adjustment

Comparing actual results to budget and forecast, making adjustments as needed.
Conclusion and Key Takeaways
Accounting plays a vital role in the success of businesses and individuals.

Financial Planning Investment Tax Compliance Performance

Set financial goals and
Decisions Ensure you are
Measurement
track your progress. Make informed complying with tax Track the profitability
decisions about where regulations. and financial health of
to invest your money. your business.