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0:00
Welcome to this series of lectures
which will introduce you
to accounting records
and accounting in business.
These sessions are designed
for non-accounting students
undertaking business
and commerce courses
and assumes
no prior knowledge of accounting.
To help bring the subject to life,
we shall follow the journey
of a friend of mine, Sean,
who starts his business
operating a Festival Lemonade Stand
which then grows to a chain of shops.
We shall see how
Sean's accounting records need to change
as his business develops
and faces new challenges
which will require
more advanced methods of accounting.
0:39
So before we start Sean's journey,
let's begin with a session
that covers the definition of accounting
and a look at some key terminology
and concepts
upon which accounting records are based.
0:53
Accounting is the collecting,
analyzing, and communicating
of financial information
to allow the users
to make informed decisions.
It's not just about preparing
regular financial or accounting records,
although that is admittedly
a key role of an accountant,
what the readers of the accounts
do with this information
is equally important.
If the accounting reports
don't assist in decision-making,
then there is little point
in preparing them.
So an accountant must ensure
that the methods used
to identify, measure,
and communicate
economic information are useful.
1:34
Users of financial information
may be restricted
to one or two individuals
in the case
of a small owner-managed business,
or extensive and varied
in the case of a larger company.
The accountant needs to be
aware of who will be using
the accounting information
they're preparing
and what the needs
of these users are.
The users are normally grouped
into the following categories
and each will have their own
particular information requirements.
The owners and managers of the business
may be the same for a small business
or different for larger companies
with shareholders,
the potential investors
and the analysts
will be interested
in the potential return
on their investment,
whilst lenders will want to ensure
the money they have lent the business
will be repaid with interest.
Suppliers and customers
will be concerned about trading terms
with the business,
whilst competitors, employees,
the government,
and community representatives
will each have information requirements
to meet their own interests.
The needs
for more detailed accounting information
normally expand in line
with the size of the business,
so it's worth now commenting briefly
on the typical types of business
and their characteristics.
