Description

Description: This Principles Of Accounting And Reporting In Commerce course introduces the fundamentals of financial and management accounting from the perspective of the business manager. It focuses on critical evaluation of accounting information contained in financial statements and application of key cost and management accounting techniques in daily business decisions.

Background: The American Accounting Association has come up with this definition of accounting: “the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information.” Accounting, therefore, is a process of identifying, measuring, classifying and communicating economic information to the users so that they can make informed decisions. Quite simply, accounting is a language: a language that provides information about the financial position and financial performance of an organization.

It is a service function, the language of business. When you study accounting, you are essentially learning this specialized language. By learning this language, you can communicate and understand the financial operations of any and all types of organizations. This is because the information required by most organizations is very similar and can be broken down into three main categories:

Operating Information

This is the information that is needed on a day-to-day basis in order for the organization to conduct its business. Operating information is what constitutes the greatest amount of accounting information and it provides the basis for the other two types of accounting information.

Financial Accounting Information

This is the information that is used by managers, shareholders, banks, creditors, the government, the public, etc., to make decisions involving the organization and its operations. Financial accounting information is subject to a set of ground rules that dictate how the information is reported and this ensures uniformity.

Managerial Accounting Information

In order for the managers of a company to make the best decisions, they need to have specific information prepared. They use this information for three main management functions: planning, implementation and control. Financial information is used to set budgets, analyze different options on a cost basis, modify plans as the need arises, and control and monitor the work that is being done.