Introduction to Accounting

Module 1:
Foundations of Accounting

Duration:
45-60 minutes

Level:
Beginner to Diploma-Level

➛ Define accounting in simple and professional terms.

➛ Explain why accounting is important in business and personal life.

➛ Identify the major activities inside accounting.

➛ Differentiate bookkeeping from accounting.

➛ Recognize real-life examples of accounting.

➛ Accounting
➛ Bookkeeping
➛ Financial Information
➛ Transactions
➛ Assets, Liabilities, Equity
➛ Financial Statements

Simple Definition:
Accounting is the process of recording, summarizing, and reporting financial information.

Professional Definition:
Accounting is a systematic process of identifying, measuring, recording, classifying, summarizing, interpreting, and communicating financial information to help stakeholders make economic decisions.

Make decisions
Should we expand? Hire more staff?

Track financial performance
Are we making profit or a loss?

Meet legal and tax requirements
File taxes, keep records, stay compliant.

Communicate with stakeholders
Investors, banks, government, suppliers.

Identifying Transactions
Anything with money - buying, selling, paying salaries.

Recording
Bookkeeping entries.

Classifying
Sorting into accounts | cash, inventory, sales, expenses.

Summarizing
Trial balance, totals.

Reporting
Preparing financial statements
➛ Income Statement
➛ Balance Sheet
➛ Statement of Cash Flows
➛ Owner’s Equity

Analysis & Interpretation
Understanding what the numbers mean.

Bookkeeping
➛ Recording daily financial transactions
➛ Clerical
➛ Based on rules
➛ Focuses on accuracy

Accounting
➛ Analyzing and interpreting financial data
➛ Professional/analytical
➛ Based on judgment
➛ Focuses on decision-making

➛ A shop records daily sales.

➛ A hospital tracks patient billing.

➛ A school prepares annual financial reports.

➛ A family creates a monthly budget.

➛ A charity tracks donations and expenses.

1. Where do you see accounting in your daily life?

Examples:
Supermarket receipts, Bank statements

2. Transaction or Not?

➛ Buying a laptop.
➛ Thinking about buying stock.
➛ Paying rent.
➛ Promising to pay next month | without a written note.
➛ Receiving cash from customers.

3. Bookkeeping vs Accounting Sorting

➛ Posting sales in the sales journal.
➛ Preparing an income statement.
➛ Recording receipts in the cashbook.
➛ Interpreting profit trends.

➛ A small bakery wants to know why profit is low this month.

➛ They track ingredients, salaries, rent, and sales.

➛ How can accounting help this bakery understand what went wrong?

➛ What is accounting?

➛ Name one financial statement.

➛ Give one difference between bookkeeping and accounting.

➛ True or False | Accounting is only used in big businesses.

➛ Give one example of a financial transaction.

Write a short paragraph answering

Q. Why is accounting important in running a business?

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Answers ➧ Here

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Users & Purposes of Accounting ➧ Here