Lecture Accounting and financial system - Lecture 1-2: Introduction to financial accounting

ACCOUNTING & FINANCIAL SYSTEMS MCPC 606 LECTURERS: DR. JOHN MACCARTHY & DR. DOLI-WURA MALIK ZAKARIA 1 LECTURE What is a business: 1-2: INTRODUCTION TO FINANCIAL ACCOUNTING •No matter the size or nature of the business, it exists to make profit. •Profit is the difference or excess of the company’s income over expenditure. Characteristics of Business •It exists to supply goods and services or manufacture to resale to the public. •It uses the organisation economic resources to create goods or services which customers will buy. •It is an organisation that provides job for people. •It is an organisation that invests their resources (money) into buildings, machinery and employees etc. 2 INTRODUCTION TO FINANCIAL ACCOUNTING Types of Business Entities •There are 3 types of business entity: Sole proprietor, Partnership, and Limited Liability Companies. •Sole proprietors: This type of business is owned and run by one individual , occasionally employing some assistants. o This is common business ownership in Ghana. Proprietor solely contributes the capital needed to run the business. o Enjoy profits alone and suffer losses alone. o Ownership of the business is not separate from the business. o Financial recounts and accounts are prepare but not required legally to make publicly 3 available. INTRODUCTION TO FINANCIAL ACCOUNTING • Partnership: This type of business occurs when two or more people decide to come together and run a business together. o The common examples of these businesses are: Accountancy practice, medical and legal practice. o Capital invested by partners are allocated based on agreement and profits and losses are equally share based on the agreement. o Allocation of duties and salary are based on law. o Financial records and accounts are produced but not required legally to make it public. 4 INTRODUCTION TO FINANCIAL ACCOUNTING • Limited Liability Companies: Type of business that ownership (shareholders) are separate from company’s debt and other debts of the company. o There is a clear distinction between shareholders and directors of limited companies. o Board of directors are appointed to run company on behalf of the shareholders. o Board delegate the day-to-day running of the business to the management. o The shareholders responsibility is limited to the amount of money invested in the business. o Except when the shareholders have given some personal guarantees. 5 ... - tailieumienphi.vn