Introduction to

Accounting

Phd Aliya Seitbatkalova

Lecture Outline:
Introduction to Ethical Responsibilities
Types of Accounting
Accounting of Accountants
• Definition and scope • Financial accounting: • Code of ethics for
of accounting Purpose and users accountants
• Historical • Managerial • Integrity, objectivity,
development of accounting: Purpose confidentiality, and
accounting and internal professional behavior
• Importance of management
accounting in business information
• Tax accounting:
Compliance with tax
laws and regulations
• Auditing: Independent
examination of
financial records
Goal of the Accounting Lecture:
The goal of this accounting lecture is to provide students
with a comprehensive understanding of the fundamental
concepts and principles of accounting.
Definition of Accounting

► Accounting is the systematic process of

identifying, recording, measuring, classifying,
summarizing, interpreting, and communicating
financial information about economic entities.
► It involves the collection, analysis, and reporting
of financial data to various stakeholders, aiding
in decision-making and financial management.
Scope of Accounting
Financial Reporting:
• Preparation of financial statements, including the balance sheet,
income statement, and cash flow statement.
• Communicating the financial performance and position of a business
to stakeholders.
Bookkeeping:
• Recording day-to-day financial transactions.
• Maintaining journals and ledgers to organize financial data.
Auditing:
• Independent examination of financial records to ensure accuracy and
compliance with accounting principles.
• Verifying the reliability of financial statements.
Scope of Accounting (contd.)

Tax Planning and Compliance:

• Complying with tax laws and regulations.
• Maximizing tax efficiency and minimizing tax liabilities.
Budgeting and Forecasting:
• Creating budgets to allocate resources efficiently.
• Forecasting future financial performance based on historical data
Cost Accounting:
• Analyzing costs associated with production, distribution, and other
business activities.
• Assisting management in cost control and decision-making.
Scope of Accounting (contd.)
Management Accounting:
• Providing internal management with financial information for planning and
decision-making.
• Assisting in evaluating performance and formulating strategies.
Financial Analysis:
• Evaluating financial data using various tools like ratio analysis and trend
analysis.
• Assessing the company's financial health and performance.
Corporate Governance:
• Ensuring accountability, transparency, and integrity within the
organization.
• Adhering to ethical standards and regulatory requirements.
 Accounting is a dynamic discipline that
encompasses various activities aimed at
managing financial information.

Conclusion

Its scope extends from recording financial

transactions to interpreting data for
informed decision-making.

Accounting is an essential tool for businesses,

organizations, and individuals, enabling them
to achieve financial stability and success.
Historical Development of Accounting
Origins of Accounting

► Accounting has a rich history dating back

thousands of years.
► It originated in ancient civilizations, such as
Mesopotamia, Egypt, and ancient Greece,
where records of financial transactions
were kept on clay tablets.
Early Accounting
Systems

In ancient Mesopotamia, clay tokens were used to

represent different goods, and these tokens were
placed in clay envelopes, acting as an early form
of accounting for inventory and trade.
Early Accounting
Systems
In ancient Egypt,
scribes recorded
financial transactions,
including taxes, trade,
and grain storage, on
papyrus scrolls.
 Luca Pacioli and Double-Entry Bookkeeping
In the 15th century, Luca Pacioli, an Italian mathematician, published the first known book on
double-entry bookkeeping, titled "Summa de Arithmetica, Geometria, Proportioni et Proportionalita."
Double-entry bookkeeping revolutionized accounting by introducing the concept of debits and credits,
ensuring accurate recording of transactions and maintaining balance in financial statements.
Industrial Revolution and Modern Accounting

The Industrial Revolution in the 18th

and 19th centuries brought
significant changes to business and
trade, leading to the need for more
sophisticated accounting methods.

The emergence of corporations and

larger enterprises increased the
demand for comprehensive
accounting records and financial
reporting.
Rise of Professional Accounting
Organizations

► In the 19th and 20th centuries, professional accounting

organizations, such as the American Institute of
Accountants (now the American Institute of Certified
Public Accountants) and the Institute of Chartered
Accountants in England and Wales, were established to set
standards and promote ethical practices.
► These organizations contributed to the professionalization
of accounting and the development of standardized
accounting principles.
 Computerization and Technological
Advancements

With the advent of computers in the 20th

century, accounting processes were
streamlined and automated, reducing
manual work and increasing accuracy.

Today, accounting software and

cloud-based platforms have further
revolutionized the accounting profession,
making it more efficient and accessible.
International Accounting Standards

•The 20th century also saw the need

for international accounting
standards to facilitate global business
transactions.
•Organizations like the International
Accounting Standards Board (IASB)
and the Financial Accounting
Standards Board (FASB) play a
significant role in developing and
harmonizing accounting standards
worldwide.
Conclusion
Accounting has evolved significantly over time,
from ancient clay tablets to modern
computerized systems.

The historical development of accounting has

shaped its principles, practices, and role in
contemporary business and financial
management.
Importance of Accounting in Business
 Overview

► Accounting is a critical aspect of business

operations that provides valuable insights
and information to stakeholders.
► Let's explore the key reasons why
accounting holds immense importance in
the business world.
 Financial Decision-Making

Accounting information aids

business owners and It provides a clear picture of
management in making the company's financial
well-informed financial health, allowing for effective
decisions. planning and resource
allocation.
 Budgeting and Planning

Accounting facilitates the creation Accurate accounting data

of budgets, enabling businesses to ensures that budgets are
set financial goals and allocate realistic and aligned with
resources efficiently. business objectives.
Performance Evaluation
Through accounting,
businesses can
monitor and evaluate
their financial
performance over
time.

Financial reports help

identify areas of
strength and
weakness, allowing
for strategic
adjustments and
improvement.
Attracting Investors and Creditors

► Investors and creditors rely on

accounting information to assess
a company's financial stability
and growth potential.

► Transparent financial reporting

instills confidence, attracting
potential investors and securing
credit from lenders.
 Compliance and Legal Requirements

► Accounting ensures
compliance with tax
regulations and financial
reporting standards.

► Adhering to accounting
principles and ethical
practices is essential for
avoiding legal issues and
financial penalties.
Resource Management

► Accounting tracks the inflow and

outflow of funds, enabling
businesses to manage cash flow
effectively.

► It helps prevent financial crises

and assists in optimizing working
capital.
 Business Growth and Expansion

► Sound accounting
practices play a crucial
role in supporting business
growth and expansion.

► With reliable financial

data, businesses can
confidently pursue
opportunities and expand
operations.
Decision-Making for Stakeholders

► Accounting information is essential

for stakeholders like employees,
suppliers, and customers to assess a
company's financial stability and
reputation.

► It empowers stakeholders to make

informed decisions related to their
involvement with the business.
 • Accounting is the language of
business, providing valuable
financial insights for
decision-making and planning.
• Its importance extends to
Conclusion every aspect of a business's
success, from internal
operations to external
stakeholder relationships.
 Questions and Discussion
► Question 1: What is the primary purpose of accounting in
business, and how does it contribute to decision-making
processes?
► Question 2: In your opinion, what might be the future trends in
accounting given its historical development and the current
technological advancements?
► Question 3: Share examples of how accounting practices have
influenced historical events, economic growth, or financial
stability in the past.
 Questions and Discussion

► Question 4: Why is budgeting important for businesses, and how

does accounting contribute to the budgeting process? Share your
thoughts on how accurate accounting data can impact the
effectiveness of budgets.
► Question 5: How does accounting information influence the
decision-making process for business owners and management?
Can you think of specific examples where financial data has
played a crucial role in making strategic choices?
► Question 6: How does reliable financial reporting attract
investors to a company? Share your insights on why investors rely
on accounting information when making investment decisions.
Financial Accounting is the
language of business! It involves
recording, summarizing, and
reporting financial transactions
to external stakeholders.
Purpose: Financial accounting
focuses on preparing accurate
and reliable financial
statements for external
stakeholders.
Users: Investors, creditors,
regulatory authorities, and the
general public rely on financial
statements to assess a
company's financial
performance and position.
 Key Features of Financial Accounting:

External Users: Financial accounting

is primarily concerned with serving Standardization: Financial accounting
external users who are not directly follows established accounting
involved in managing the company principles and standards, ensuring
but have a financial interest in it. uniformity and comparability of
These users include investors, financial statements across different
creditors, analysts, regulators, and companies and industries.
the general public.

Historical Reporting: Financial Transparency: Financial accounting

accounting focuses on past financial aims to provide a clear and transparent
events and transactions, resulting in view of a company's financial
historical financial statements, such performance, position, and cash flows,
as income statements, balance facilitating trust and confidence among
sheets, and cash flow statements. stakeholders.
 Roles of Financial Accounting:

Financial Financial Financial Financial

accountants accounting ensures accountants work accounting plays a
prepare and compliance with with external crucial role in
present financial accounting auditors to verify investor relations,
statements, principles, the accuracy and as it
providing an financial reporting completeness of communicates the
overview of the standards, and financial company's
company's regulatory statements, financial
financial position requirements. enhancing their performance to
and performance reliability. shareholders and
during a specific potential
period. investors.
 Financial Statements in Financial
Accounting:
► Income Statement: Also known as the profit and loss
statement, it shows a company's revenues, expenses, and net
income or loss over a specific period.
► Balance Sheet: Presents the company's financial position at a
specific point in time, showing its assets, liabilities, and
shareholders' equity.
► Cash Flow Statement: Records the cash inflows and outflows
from operating, investing, and financing activities, providing
insights into the company's liquidity and cash management.
 Conclusion:

Financial accounting serves as the backbone of

financial reporting, providing crucial information to
external stakeholders for decision-making,
investment analysis, and performance evaluation.
Through accurate and transparent financial
statements, financial accounting fosters trust,
enhances accountability, and contributes to the
overall stability and credibility of the financial
markets.
Managerial accounting, also
known as management
accounting, is a branch of
accounting that focuses on
providing financial information
and analysis to internal users
within an organization. Unlike
financial accounting, which is
primarily concerned with
reporting financial information to
external stakeholders, managerial
accounting is tailored to meet the
specific needs of managers and
decision-makers within the
company.
 Key Features of Managerial
Accounting:
Internal Use:

Managerial accounting information is intended for use within the organization and is not
disclosed to external parties.

Forward-Looking:

While financial accounting focuses on historical financial data, managerial accounting

emphasizes future-oriented information, helping managers plan and predict future outcomes.

Flexibility:

Managerial accounting allows customization of reports and analyses to cater to the specific
needs of different levels of management.

Decision Support

It provides relevant data and analysis to aid managers in making decisions related to pricing,
product mix, cost management, resource allocation, and more.
 Roles of Managerial Accountants:

Capital Budgeting:

Decision Analysis:
Budgeting and Planning:

Performance Evaluation:
Cost Analysis and Control
Managerial They analyze Managerial They assist in Managerial
accountants costs accountants evaluating accountants
are involved associated evaluate the potential use financial
in creating with different performance investment models and
budgets for activities, of opportunities scenario
various products, or departments, and capital analysis to
departments services to projects, or expenditure support
and projects, identify areas individuals decisions to strategic
setting of inefficiency against set maximize decision-maki
financial and goals and key return on ng.
targets, and recommend performance investment.
monitoring cost-saving indicators
progress. measures. (KPIs).
 Types of Reports in Managerial
Accounting:

Budget Reports: Cost-Volume-Profit

Showing actual vs. (CVP) Analysis:
budgeted performance Examining how changes
for various cost centers in costs, volume, or
or projects. prices affect profits.

Performance
Variance Analysis: Dashboards: Visual
Analyzing discrepancies representations of key
between actual and performance metrics for
expected performance. quick and easy
monitoring.
In summary, managerial accounting
plays a vital role in helping managers
navigate the complexities of business
operations. By providing timely and
relevant financial information, it
empowers decision-makers to make
well-informed choices that lead to the
efficient allocation of resources and
improved overall performance.
Tax accounting is a specialized
branch of accounting that
focuses on preparing and filing
tax returns and ensuring
compliance with the complex
and ever-changing tax laws and
regulations. It involves the
systematic recording, analysis,
and reporting of financial
transactions from a tax
perspective. The primary goal
of tax accounting is to calculate
and manage tax liabilities
accurately while maximizing tax
benefits and incentives within
the legal framework.
Key Features of Tax Accounting:
Tax Planning:
• Tax accountants help individuals and businesses strategically plan their
financial activities to minimize tax liabilities. They explore legitimate
deductions, credits, and exemptions to optimize tax outcomes.

Tax Compliance:
• Tax accounting ensures accurate and timely filing of tax returns with the
relevant tax authorities, such as the Internal Revenue Service (IRS) in the
United States or other national tax agencies worldwide.

Tax Research:
• Tax accountants continuously monitor changes in tax laws and regulations
to stay up-to-date with the latest developments and ensure compliance
with the law.

Tax Reporting:
Tax accountants prepare various tax-related documents and reports, such as
W-2s, 1099s, and other informational returns required by tax authorities.
 Roles of Tax Accountants:
• Tax accountants assist individuals in preparing their personal
Individual Taxes: income tax returns, ensuring that they take advantage of available
tax deductions and credits.

Corporate • For businesses, tax accountants handle complex tax calculations,

deductions, and credits, and they ensure accurate tax reporting for
Taxes: corporations, partnerships, and sole proprietorships.

• Tax accountants provide advice and guidance on tax implications

Tax Advisory: related to business decisions, investments, mergers, and
acquisitions.

In case of a tax audit, tax accountants represent clients before tax

Tax Audits: authorities and help resolve any tax-related disputes.
Types of Tax Accounting:
► Income Tax Accounting: Focused on calculating and
reporting taxes on various sources of income, such as
wages, dividends, interest, and capital gains.
► Sales Tax Accounting: Involves tracking sales and
applicable sales taxes for retail businesses and ensuring
compliance with sales tax regulations.
► Corporate Tax Accounting: Concerned with the tax
implications of business income, expenses, and deductions
for corporations.
► International Tax Accounting: Deals with the
complexities of international tax laws and regulations for
multinational businesses conducting cross-border
transactions.
In conclusion, tax accounting is an essential
aspect of financial management, ensuring
that individuals and businesses meet their tax
obligations while making informed decisions
to optimize tax outcomes. Tax accountants
play a crucial role in guiding clients through
the intricacies of tax laws and providing
valuable advice to minimize tax liabilities
within the boundaries of the law.
Auditing Accounting
Key Features of Auditing Accounting :
Independence: :
• Auditors are external to the organization and must maintain independence
to avoid any bias or conflicts of interest during the audit proces.

Verification:
• Auditors verify the accuracy and completeness of financial transactions and
records by examining supporting documents and evidence.

Compliance:
• Auditing ensures that financial statements are prepared in accordance with
relevant accounting principles and regulatory requirements.

Professional Judgment:
Auditors exercise professional judgment while assessing accounting
estimates, evaluating internal controls, and forming opinions.
 Types of Audits:
Financial Statement Audit: The most common type of audit,
focusing on verifying the accuracy of financial statements and
ensuring compliance with accounting standards.
Internal Audit: Conducted by internal auditors employed by the
organization, this audit assesses internal controls, risk
management, and operational processes.
Compliance Audit: Ensures that the organization is adhering to
laws, regulations, and internal policies.

Forensic Audit: Investigates financial irregularities, fraud, or

financial misconduct within the organization.
 Audit Process:

Planning

Gathering
Reporting
Evidence

Forming an
Assessment
Opinion
 Importance of Auditing:
Provides assurance to stakeholders that financial statements
are reliable and can be trusted for decision-making.

Identifies weaknesses in internal controls, allowing companies

to strengthen their financial reporting processes.

Helps detect and prevent fraud and financial misstatements,

safeguarding the interests of shareholders and investors.
In conclusion, auditing accounting plays
a critical role in ensuring the integrity
and credibility of financial information.
By providing an independent assessment
of financial statements, auditors
enhance transparency, accountability,
and confidence in the financial
reporting process.
 Other Specializations in Accounting:

Cost Forensic International Government Nonprofit

Accounting: Accounting: Accounting: Accounting: Accounting:

Focuses on
Focuses on
Addresses accounting
analyzing Deals with Specializes
accounting for
and investigati in
issues nonprofit
allocating ng accounting
related to organizatio
costs to financial for
multinatio ns and
products or fraud, governmen
nal adheres to
services to embezzlem t agencies
companies specific
aid in ent, and and public
operating accounting
pricing other sector
across standards
decisions financial organizatio
different for the
and cost crimes. ns.
countries. nonprofit
control.
sector.
 Key Roles of Accounting in Business
Financial Record Compliance:
Keeping: Financial Reporting:
Explain how Discuss how Highlight the role of
accounting keeps accounting prepares accounting in
track of all financial financial statements, ensuring compliance
transactions, such as income with relevant laws,
including sales, statements, balance regulations, and
expenses, and sheets, and cash flow accounting standards.
investments statements, to
provide an accurate
snapshot of the
business's financial
position.
 Questions and Discussion
► Question 1: What are the main objectives of financial accounting,
and why is it crucial for external stakeholders?
► Question 2: In what ways does managerial accounting differ from
financial accounting? How does managerial accounting contribute
to internal decision-making within a company?
► Question 3: Why is tax accounting essential for businesses? How
can tax accountants help companies optimize their tax liabilities
while complying with tax laws?
► Question 4: What is the role of auditors in the auditing accounting
process? How does auditing provide assurance to stakeholders
about the accuracy of financial statements?
Ethical Responsibilities of Accountants
In the accounting profession, ethical responsibilities are of utmost
importance due to the sensitive nature of financial information and the
role accountants play in financial reporting and decision-making. Some
key ethical responsibilities of accountants include:

Integrity Objectivity Confidentiality Competence

Anti-Fraud
Professionalism Independence Compliance
Measures

Continuing
Education
Ethical responsibilities are essential for
several reasons:
► Maintaining Trust: Ethical behavior builds trust and confidence in
individuals, organizations, and professions.
► Protecting Reputation: Adhering to ethical standards safeguards the
reputation and credibility of the accounting profession.
► Promoting Fairness: Ethical conduct ensures fairness in financial
reporting, benefiting all stakeholders involved.
► Compliance and Accountability: Ethical responsibilities help ensure
compliance with laws and regulations, holding individuals
accountable for their actions.
► Preventing Fraud and Mismanagement: Ethical behavior helps
prevent financial fraud, mismanagement, and unethical practices.
 Conclusion
Ethical responsibilities are the foundation of
a reputable and trustworthy accounting
profession. Accountants play a critical role in
upholding the highest ethical standards to
protect the interests of their clients,
stakeholders, and the overall integrity of the
financial reporting process.
Thank you for your
time and attention
today.