Principles of Accounting
WINTER TERM 2024-2025
RUZGAR MIKAYILOVA , M.SC.
Accounting and the business world
A C C O U N T I N G F O R N O N - A C C O U N T I N G S T U D E N T S 9 T H E D I T I O N . J O H N R . DY S O N / E L L I E
FRANKLIN
W E Y G A N D T, K I M M E L , K I E S O . F I N A N C I A L A C C O U N T I N G , I F R S E D I T I O N . 2 0 2 0 . W I L D , J O H N J . ,
K E R M I T D . L A R S O N , A N D B A R B A R A C H I A P E T TA .
F U N D A M E N TA L A C C O U N T I N G P R I N C I P L E S , M C G R A W - H I R W I N , 2 0 1 2 . I S B N 0 - 0 7 - 2 4 2 3 3 9 - 0
A C C A F 3 , B P P, S T U DY A N D R E V I S I O N K I T, 2 0 2 0
The Business World
The business world encompasses all companies, including lean startups, family-
owned shops, freelancers, and solo entrepreneurs.
While the corporate world offers stability, structure, and resources, it can also
mean bureaucracy, office politics, and lack of creativity.
The purpose of a business is to organize some sort of economic production of
goods or services.
Accounting
The system of recording and summarizing business and financial transactions
and analyzing, verifying, and reporting the results.
Accounting is the process of keeping track of all financial transactions within a
business, such as any money coming in and money going out.
Relationship between accounting
and business
Accounting is like the language of business, and financial statements are like
the building blocks of that language.
These statements show us how a company is doing financially.
They tell us about things like how much money is coming in, how much is going
out, and how much cash the company has.
Role of accounting in the business
world?
Accounting plays a vital role in budgeting and planning, allowing businesses to
set financial goals and allocate resources effectively.
Through the budgeting process, organisations can forecast their expenses,
revenues, and cash flow for a specific period.
Main purpose of accounting in a
business
The purpose of accounting is to accumulate and report on financial information
about the performance, financial position, and cash flows of a business.
This information is then used to reach decisions about how to manage the
business, or invest in it, or lend money to it.
Accountants
Accountants do important things for businesses.
They handle bookkeeping, financial reports, and making sure you follow the law.
They also deal with wages, help you save tax, and plan for the future of your business.
This ensures your company runs smoothly and you use money wisely.
Accountants
Accountants play a key role in maintaining these systems by providing accurate and reliable
financial information.
This information is essential for investors, creditors, and regulators, who use it to make
decisions that affect the flow of capital and the allocation of resources in the economy.
Accountants have the power to change the world on a macro scale: helping to develop
government policies, driving not-for-profit organisations, standing at the forefront of
environmentalism or fintech: the opportunities and fields of influence are almost
Modern Approach to Accounting
Thus, it is also known as the Accounting Equation Approach.
The Basic Accounting Equation is: Assets = Liabilities + Capital (Owner's Equity)
Furthermore, it can be expanded as Assets = Liabilities + Capital + Revenues – Expenses.
Also, Profit = Revenues – Expenses.
Why it is important to study principles of accounting?
To be able to analyse financial statement to make right decision
To be able to comply financial statement for others to read
To be able to generate accounting guidance or rules for others to follow
To be able to develop improved accounting practices for changed business situations
To defend accounting reputation among the non-accountants
Thank you for your attention!
