Instructor: Mubasshir Hussain Awan

Syed Sheraz Ahmed Shah

Roll no: 814-MBA-17
Accounting Assignment
Accounting as a Discipline
Just like Alphabets and numbers Accounting is the language of business and is the most essential part of a
business whether its small or on a large scale. Accounting is the process of recording financial information,
there are three steps input, process and output. We input financial information which goes through a process
most commonly known as accounting cycle and then the output is in the form of Financial Statements.

• Record Keeping
• Finacial Monetary in Nature
Acoounting • Relevant

• Routine Transactions
Input
• Events

•Accounting Cycle
Process

• Financial Satemetns
Output

Accounting
 Record Keeping
Process of recording transactions and events in an accounting system.

 Financial and Monetary in Nature

Every information that is recorded in an accounting system has to be Financial in nature and must
have some monetary value attached to it.

Input
 Routine Transactions and Events
All the day to day transaction whether its daily wages, bills, purchases, operational expenses salaries
and significant events like selling or buying assets dividends bonuses every transaction which has
monetary value attached to it will be recorded in the accounting system
Process
 Accounting Cycle

Journal Entries

Ledger
Post Closing
Accounts
Trial Balnce
(T accounts)

Unadjusted
Closing Entries
Trial Balance

Financial Adjusting
Statemets Entries

Adjusted Trial
Balance

Output
 Financial Statements
Consolidated Report of a company’s financial position at the end of the accounting cycle, these
reports include, Balance sheet, Income statement, cash flow. These reports are produced in light of
the International Accounting standards (IAS). These statements are used by investors governments
and potential investors and must be complete, accurate timely and standardised.

Objectives of Accounting

 Planning
 Decision Making
 Determination of Financial Position
 Accountability
Role of Accounting in Managing a Business
To run a business regardless of its size management needs data, information which must be accurate,
to make decisions. All the activities involved in a business whether its production, procurement of
assets, arrangements of finances managing debt calculating profits all these process will have some
sort of monetary value attached to it, almost everything in a business have a cost and this cost is
incurred to generate revenue all this information is recorded, processed through the accoutring
system and that system generates an output in form of financial statement which is used by the
management to make decisions. Some ways in which accounting aids managers are:
  Decision Making
A manager cannot make a decision without solid information on which he basis his or her
decision this information must be accurate and genuine otherwise it negates the whole
purpose. Accounting provides information about assets, liabilities, costs, profit, loss earnings,
profitability etc. managers then use this information to make all major and non major
decisions in a business.
 Planning
Planning is the first part of business, managers need to come with a plan for sales,
procurement of assets/resources, maintaining adequate cash flow, forecasting and budgets all
these activities are directly or indirectly dependant on accounting information.
 Controlling
Controlling the performance of the organisation by using standard costing, budgetary control,
accounting ratios, cash and funds flow statements, cost reduction programmes and evaluating
the capital expenditure proposals and return on investment.
 Understating Cost structure
Cost structure of a business is extremely important, understanding the cost structure helps
managers predict how their business activities will effect their profitability and growth. For
this purpose, Income statement which provides information about cost of goods sold,
operating income and operating expenses this helps managers to compare there business to
similar ones in the same industry and keep check on profit margins.
 Maximizing Profitability
Accounting information will give managers an idea about there portfolio which will identify
products and services which are more profitable and which are making a loss this way
managers can make decisions to maximize their profitability by investing in profitable
products.

Accounting Software

Small Business Enterprise Grade

FreshBooks Acumatics
Xero Intacct
Zoho Books AccountMate
Intuit QuickBooks Online Cougar Mountain Denali Summit
GoDaddy Bookkeeping Oracle NetSuite OneWorld
Kashoo Open Systems Traverse
Sage 50c Premium Accounting SAP Business One Professional
Wave QuickBooks Desktop Enterprise
OneUp Sage 300
Accounting Edge Pro Microsoft Dynamic GP
Recent Developments in Accounting

Luca Pacioli first came up with the double entry bookkeeping system in 1494 when he published its
description in his book in Venice. Since then Accounting is constantly developing. Over the years’ different
stakeholders felt the need that accounting information must be accurate timely and should not be misleading.
The first step in my view to make accounting more transparent was the establishment of U.S Securities and
Exchange Commission in 1934 which set standard for financial accounting and reporting. American
Institute of Accountants, the Committee on Accounting Procedure (CAP) was the very first private body
which for setting accounting standards from 1938-1959 but it did not provide a conceptual framework.

CAP was replaced by Accounting Principles Board (APB) which issued multiple publication tried to
establish standards and also attempted to developed a conceptual framework but failed just like CAP. The
main reason for its failure was lack of representation of stakeholders. In 1973 APB was merged into a new
body known as The Financial Accounting Standards board (FASB). It consisted of 7 full time members
consisting of accounting professionals and various stakeholders it worked under the umbrella of Financial
Accounting Foundation. In 1984 Government Accounting Standards Board (GASB) was setup to issue
guidelines for Government financial reporting.

During this time UK & Europe were working on standardised accounting principles for that purpose
International Accounting Standards Committee (IASC) was established in 1973. They created Standards
Interpretation Committee (SIC) in 1997 to study problems in accounting and find their solutions. The IASC
setup the International Accounting Standards Board (IASB) in 2001 to setup international standards all the
standards issued by IASB are labelled as International Financial Reporting Standards (IFRS). In 2001, the
International Organization of Securities Commission (IOSCO) has approved the use of IAS/IFRS for cross-
border offerings and listings and was also adopted in 2005 by all listed companies in the European Union.

The IASB & FASB are working together to remove any differences between international accounting
standards, The Norwalk Agreement was singed in 2002 to converge and gaps between IFRS & US GAAP
after years of working together some major projects have been completed
Converged standards on business combinations (2008)
Converged standards on business consolidation (2011)
Converged standards fair value measurement (2011)
Converged standards revenue recognition (2014)
Converged standards leases (2016)
Unfortunately, Collaborations between the two boards have since stop any future issuance of standardised
principles is looking very bleak, but individually these body are constantly updating their principles with
FASB introducing Current Expected Credit loss (CECL) standard in 2016. FASB Issued Accounting
Standards for Goodwill in 2012, FASB Issued Accounting Standards for Statement of Cash Flows (Not-for-
Profit Entities: Classification of the Sale Proceeds of Donated Financial Assets in the Statement of Cash
Flow in 2012, and some other individual body wise standards are issued by both main accounting bodies.

According to FASB investors feedback revealed GAAP was fulfilling there needs so they abandoned the
convergence to work on targeted issues one can say that FASB is biased towards IFRS because most
countries are now adopting IFRS and dumping GAAP.
References/Citations

 http://accounting-simplified.com/financial/objectives-&-purpose.html
 https://onlinemasters.ohio.edu/the-role-of-financial-statements-in-managerial-
decision-making/
 https://www.linkedin.com/pulse/20140614155223-158052322-how-managerial-
accounting-aids-responsible-business-management
 http://www.accountingnotes.net/management-accounting/top-10-functions-of-
management-accounting-2/5858
 https://www.pcmag.com/article2/0,2817,2458748,00.asp

 https://www.pcmag.com/article/342998/the-best-enterprise-class-general-ledger-
accounting-software

 https://www.linkedin.com/pulse/historical-perspective-development-accounting-
jesus-obana-cpa-mba

 http://www.ksmcpa.com/news-blog/recent-developments-in-accounting-standards