Course Progress
Part of 2 Chapters
Chapter 1
Introduction to Accounting & Financial Statements
#Accounting#Financial Statements#Assets#Liabilities#Equity#Debit#Credit
Chapter 1: Foundations of Accounting
Accounting is the “language of business” that identifies, measures, and communicates the economic activities of an entity to support informed decision-making by users.
1. Definition and Purpose of Accounting
(1) Definition
Accounting refers to the process of systematically organizing a company’s financial position and management performance to deliver it to stakeholders (investors, creditors, government, etc.).
(2) Classification of Accounting
- Financial Accounting: Preparing reports for external stakeholders (Focus on Financial Statements).
- Managerial Accounting: Providing information for internal decision-makers (Management).
- Tax Accounting: Calculating taxable income according to tax laws.
2. Core Structure of Financial Statements
The five key reports that represent a company’s financial health.
| Report Name | Abbreviation | Key Content | Identity/Features |
|---|---|---|---|
| Balance Sheet | B/S | Financial position at a point in time | ==Assets = Liabilities + Equity== |
| Income Statement | I/S | Performance over a period | ==Revenue - Expenses = Net Income== |
| Changes in Equity | - | Changes in owner’s equity | Capital, Retained Earnings |
| Cash Flow Statement | - | Inflow and outflow of cash | Operating, Investing, Financing |
| Notes | - | Supplementary information | Detailed breakdown & standards |
3. Double-Entry Bookkeeping & Trial Balance
The fundamental operating principles of modern accounting.
- Duality of Transactions: Every transaction is recorded on both the ==Debit (Left)== and ==Credit (Right)== sides.
- Trial Balance Principle: The sum of the debit amounts must always equal the sum of the credit amounts. ()
Key Checklist
- Which report shows a company’s financial position (assets, liabilities, equity) at a specific point in time? (Answer: Balance Sheet, B/S)
- In the accounting equation, what is the result of ‘Assets - Liabilities’? (Answer: Equity)
- What is the principle called when recording transactions on both the left and right sides simultaneously? (Answer: Duality of Transactions)