Introduction to Financial Accounting

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Introduction to Financial Accounting
If a person or a group of people establishes a project, the main goal of establishing this project will be to make a profit, and in order to ensure that this goal is achieved, an accountant or financial manager is appointed who is able to provide users with financial information related to the project to make appropriate decisions.
accounting concept
Accounting can be defined as a process through which financial information is identified, recorded, and communicated to users to make appropriate decisions. When a financial transaction occurs and is identified, we then record it in the books according to accounting principles and assumptions to obtain useful financial information that is communicated to decision makers in the company or establishment.
Accounting goals
Register any financial event directly related to the establishment immediately upon its occurrence and based on the documents proving the validity of the registration.
Clarifying the result of the company’s work, whether profit or loss, during a specific period of time.
A statement of the company's financial position, i.e. an inventory of the assets (assets) owned by the establishment and its liabilities for a specific period of time.
Providing the necessary financial information and reports to the departments in order to plan, control and make appropriate decisions.
Financial Statements
The financial statements are considered an essential source of financial and accounting information useful for decision-making, and the financial statements that are prepared are:
income list:
Through this list, users can know the result of the establishment's work, whether profit or loss, by matching revenues with expenses during a specific financial period.
Statement of Financial Position (Balance Sheet):
Through this list, users can know the company's financial position, its assets (assets), and its liabilities at a particular moment.
List of property rights:
Through this list, users can know the changes that occurred in the rights of the owners of the establishment during a specific financial period.
Cash flow statement:
Through this list, users can know the (incoming) cash receipts and (outgoing) cash payments to and from the establishment.
Complementary notes:
These clarifications are attached to the financial statements to give detailed information about the items of the financial statements and the accounting policy used in preparing the financial statements.
Users of accounting information:
The users benefiting from the accounting information are divided into two parts:
users from within the facility
Project owners
Department managers
users from outside the facility
Banks and lenders
Governmental entities
external auditor
accounting assumptions
Accounting assumptions are information and ideas that cannot be verified, but must be agreed upon in order to understand the information and financial statements. The most acceptable accounting assumptions are:
Imposing the independent accounting unit
According to this hypothesis, the establishment has an independent personality from the owners, and its operations and funds are separated from the operations and funds of its owners.
Impose a monetary unit of measure
According to this hypothesis, the monetary unit is considered a means to measure and prove all accounting operations, such as the dollar, for example
Assuming continuity
According to this hypothesis, it is assumed that the establishment that has been established will continue to carry out its activity and business for several years, unless events occur that lead to its liquidation.
accounting period
According to this hypothesis, the life of the establishment and its activities are divided into equal time periods, so that the result of the activity of each period is measured separately instead of waiting until it is liquidated, and the period is often a year long and is called a fiscal year.
Accounting principles
It is the general framework used in recording accounting operations that are based on accounting assumptions. Among the most important accounting principles are:
The historical cost principle
According to this principle, the original cost price is adopted in recording assets and liabilities, regardless of any change in their market value in the future.
Revenue recognition principle
Revenue is earned if two conditions are met:
Delivery of sold goods or provision of service to others.
The existence of a real exchange process between the establishment and others.
The principle of matching revenues with expenses
According to this principle, the net income of the enterprise is determined from profit or loss by matching revenues with expenses during the financial period. The current financial period or related to other financial periods, and according to the accrual basis, the revenues related to the current financial period are recorded, whether they were received or not, as well as the expenses that relate to the current period, whether paid or not.
The precautionary principle (reservation)
According to this principle, expected losses are taken into account before they occur, and expected profits are ignored until they are actually achieved.
Disclosure principle
According to this principle, the accountant must disclose all the financial information of the establishment during the financial period, provide the necessary clarifications and notes, and not conceal any financial information that may mislead the users of the financial statements.
Principle of constancy:
According to this principle, the establishment must apply accounting principles and methods consistently to all financial periods, in order to compare the activities of the establishment from one period to another in a correct manner, and if the establishment decides to change the method or accounting principle followed, it must be disclosed in the financial statements.
accounting branches
Financial Accounting
It is based on analyzing, recording and communicating financial information to decision makers for a specific period of time.
Cost accounting
Providing financial information related to the cost of production or the product and submitting the necessary reports to the management for planning, controlling and making appropriate decisions.
accounting administration
It provides the necessary information and reports to the administrative authorities to help them make decisions and compare the actual performance with what has been planned.
government accounting
Provide the information

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