INTRODUCTİON TO BUSİNESS - Deneme Sınavı - 6

Bookkeeping is the recording of a firm’s financial transactions which usually involves only the recording of budgetary events.

Internal users of accounting information are managers who plan, organize, and run a business. They include marketing managers, production supervisors, finance directors, and company officers.

Financial accounting measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP)

Help managers make decisions to fulfill an organization’s goals. Reports to those inside the organization for:
• Planning
• Directing and motivating
• Controlling
• Performance evaluation

The accounting cycle is a set of steps that are repeated in the same order every period to keep track of what happened in the business and to report the financial effect of those transactions.

In practically every business, there are three basic steps in the recording process:
1. Analyze each transaction for its effects on the accounts,
2. Enter the transaction information in a journal,
3. Transfer the journal information to the appropriate accounts in the ledger

A ledger is the book holding all the accounts with their balances.

The income statement shows the amount of sales, all the costs incurred in making those sales and all the overhead costs incurred in running the operations of the company so it would be able to deliver on its promises to customers

Accounting is an information system that provides reports to decision makers about the economic activities and condition of a business.

• Sales documents • Purchasing documents
• Payroll records • Bank records • Others

Processing:

• Journalizing • Balance sheet • Income statement • Cash flows statement

• Other reports • Posting • All accounts are summarized

Outputs:

• Balance sheet • Income statement • Cash flows statement

• Other reports

Labor unions want to know whether the owners have the ability to pay increased wages and benefits.

We can summarize the main purposes of managerial accounting information that is used within a business as follows:

Planning: An example of planning is budgeting. Budgeting is the process of forecasting future financial needs. This process is based on the funds that the com- pany expects to collect as a result of sales and how much will be paid to purchase materials, for salaries, and wages etc.

Decision Making: Managerial account- ing information will be helpful to evaluate various alternatives available. For example, management may be considering whether to purchase or lease an equipment.

Control: Management also uses account- ing information to determine whether the business is operating according to its plans and identifies the differences.

An audit is an examination of a company’s financial records.

The transaction is recorded chronologically in the journal. All the transactions are recorded through journal entries. The third step is to post each journal
entry to the appropriate ledger accounts. The journalized transactions are posted to the account that it impacts. The accounting cycle requires summarizing of the entries pertaining to a particular period in a trial balance. A trial balance is essentially a list of all accounts and provides an overview of the various types of financial transactions entered into by any organization during a period. After preparation of trial balance, the next step is recording the adjustments like adjusting prepaid/outstanding expenses, recording advance/accrued income, etc. The purpose of adjusting entries is to match incomes with expense during the accounting period. One of the most important steps of the accounting process involve preparing the financial statements. Final step of the accounting process involves closing the books for the revenue and expense accounts which leads to begin again the entire cycle with zero balances.

A transaction is an event that affects the financial position of the enterprise and requires recording.

Operating cycle consists of : I. Cash  II. Inventory IV. Accounts Receivable

Retained earnings are the profits that the owners do not take out of the business but instead save for use by the business.

Liquidity is a firm’s ability to meet short- term obligations. The greater the level of current assets available relative to current liabilities, the greater the firm’s liquidity.

Bookkeeping is the act of recording and organizing financial transactions in the accounting system in accordance with the generally accepted accounting principles (GAAP). It ensures that records of the individual financial transactions are correct, up-to-date, and comprehensive. In modern accounting systems, bookkeeping is processed by computer software.

-Bookkeeping and accounting are not the same processes.

-Bookkeeping is the recording of a firm’s financial transactions which usually involves only the recording of budgetary events.

Accountancy profession in Turkey is regulated through the law No. 3568, “The Law of Independent Accountancy, Certified Public Accountancy, and Sworn-in Certified Public Accountancy”. It was enacted in 1989.

-The Law defines accounting and auditing as a profession and recognizes two qualifications of accounting and auditing professionals granted by the Union of Chambers of Certified Public Accountants (TÜRMOB): Certified Public Accountant (CPA, Serbest Muhasebeci Mali Müşavirler-SMMM) and Swornin Certified Public Accountant (Sworn-in CPAs, Yeminli Mali Müşavirler-YMM). Only accountants who have been awarded a license by TÜRMOB are entitled to render professional services.

-In distinguishing between the two titles, SMMMs may keep books, prepare financial statements, and conduct general audits, but cannot perform tax audits nor provide consulting services.