Lesson One　Accounting in GeneralLesson OneAccounting in General

Learning Objectives：

1.Explain what accounting is and identify the users of accounting information.

2.Tell the difference between bookkeeping and accounting.

3.Tell the difference between financial and managerial accounting.

4.Be familiar with generally accepted accounting principles.

5.Explain the basic accounting assumptions.

Text

Accounting

Accounting is an information system that identifies，records，and communicates the economic events of an organization to interested users.Economic events are activities related to the production and distribution of goods and services in an organization.Through the accounting process，financial information is accumulated and reported in financial statements to show the organization’s financial position and the results of its operations.

The Users of Accounting Information

Accounting must consider the needs of the users of financial information.Therefore，accountants need to know who these users are，and their needs for information.The information which a user of financial information needs depends upon the kinds of decisions that he or she makes.The differences in the decisions divide the users of financial information into two broad groups：internal users and external users.

Internal users of accounting information are those who plan，organize，and run a business.They are generally the management of a business.External users are those who work for other organizations but have an interest in and need for information about the financial position and performance of the company.These include investors，creditors，taxing authorities，government agencies，customers and labour unions，etc.

Distinguishing between Bookkeeping and Accounting

Many people mistakenly consider bookkeeping and accounting to be the same.Actually，the accounting process includes the bookkeeping function.And moreover，it involves the entire process of identifying，recording，and communicating economic events.Bookkeeping usually involves only the recording of economic events，it is therefore just one part of the accounting process.Accounting requires a higher level of expertise and judgement than bookkeeping，because economic events must be identified and measured，effectively communicated，and then interpreted to help users in their decision-making.（注：Weygandt&Jerry J.，Accounting Principles，2nd Canadian Edition，Vol.1，John Wiley&Sons Canada，Ltd.，Etobicoke Ontario，2002，p.6.）

Financial Accounting and Managerial Accounting

Accounting may be further divided into financial accounting and managerial accounting.Financial accounting is the field of accounting that provides economic and financial information for investors，creditors，brokers and other external users as well as management of the business.It provides historical information.Managerial accounting provides accounting information for managers and other internal users who need more detailed information，including plans for the future.This textbook focuses on issues of financial accounting.

Generally Accepted Accounting Principles

The accounting profession has developed a set of standards that are generally accepted and universally practised.These standards recommend how to report economic events and are called generally accepted accounting principles（GAAP）.They are developed over time and closely related to tradition，experience and user needs.

The following are some fundamental principles of GAAP：

Historical Cost Principle.Assets should be recorded at their original historical cost.In later periods，the cost amounts are not adjusted upward.

Objectivity Principle.Accounting entries must be based on objectively determined evidence whenever possible.

The Revenue Recognition Principle and the Matching Principle.These two principles will be introduced later as we progress through this textbook.

In developing generally accepted accounting principles，certain basic assumptions are made as follows.These assumptions provide a foundation for the accounting process.（注：Weygandt&Jerry J.，Accounting Principles，2nd Canadian Edition，John Wiley&Sons Canada，Ltd.，Etobicoke Ontario，2002，p.6.）

Going Concern Assumption.It is assumed that a business will continue to operate in the foreseeable future.

Monetary Unit Assumption.This assumption requires that only transaction data that can be expressed in terms of money be included in the accounting records.It enables accounting to measure economic events.

Economic Entity Assumption.It is assumed for accounting purposes that each business is a separate entity from its owner（s）and from every other business.The business enterprise as an economic entity may be organised as a sole trader，partnership，or a corporation.

Accounting Period Assumption.The life of the business entity can be divided into equal periods.This division is useful because it provides a fixed period on which accounting reports can be based.（注：Kieso&Donald E.，Intermediate Accounting，6th Canadian Edition，Vol.1，John Wiley&Sons Canada，Ltd.Etobicoke Ontario，2002，pp.10-11.）

New Words and Terms

■accounting会计■

■communicate传递■

■economic events经济业务■

■financial information财务信息■

■accumulate累积■

■financial statement财务报表■

■financial position财务状况■

■accountant会计人员■

■management管理，管理当局■

■performance业绩，表现■

■investor投资者■

■creditors债权人■

■taxing authority税务部门■

■agency机构，代理人■

■labour union工会■

■bookkeeping簿记■

■expertise专门知识■

■financial accounting财务会计■

■managerial accounting管理会计■

■broker证券经纪人■

■tradition传统，惯例■

■Historical Cost Principle历史成本原则■

■Objectivity Principle客观性原则■

■Revenue Recognition Principle收入实现原则■

■Matching Principle配比原则■

■assumption假设，前提■

■Going Concern Assumption持续经营假设■

■foreseeable可预见的■

■Monetary Unit Assumption货币计量假设■

■Economic Entity Assumption会计主体假设■

■sole trader独资企业■

■partnership合伙企业■

■corporation股份公司■

■Accounting Period Assumption会计期间假设■

Notes to the Text

1.Accounting may be further divided into financial accounting and managerial accounting.会计可以进一步分为财务会计和管理会计。财务会计主要服务于外部信息使用者，管理会计则主要为内部管理者提供信息。由于内部管理的需要，管理会计提供的信息比财务会计提供的信息要详细一些。此外，按照提供财务信息的目的，会计还可以划分为企业会计（private accounting）、公共会计（public accounting）、非营利组织会计（non-for-profit accounting）、成本会计（cost accounting）等。

2.Generally Accepted Accounting Principles公认会计原则（GAAP），这是会计职业界普遍接受并遵守的会计核算基本原则，如历史成本原则（Historical Cost Principle），客观性原则（Objectivity Principle），收入实现原则（Revenue Recognition Principle），配比原则（Matching Principle）等。GAAP的前提是会计核算的基本假设，包括持续经营假设（Going Concern Assumption），货币计量假设（Monetary Unit Assumption），会计主体假设（Economic Entity Assumption）和会计期间假设（Accounting Period Assumption）。

More Knowledge

Parties Involved in Standard Setting

A number of organizations are involved in developing accounting standards.In the U.S.，the Financial Accounting Standards Board（FASB，财务会计准则委员会）is a major standard-setting body.The American Institute of Certified Public Accountants（AICPA，美国注册会计师协会）is the main professional accounting body for Certified Public Accountants.The Securities and Exchange Commission（SEC，美国证券交易委员会）supports the FASB by indicating that financial statements should conform to FASB standards.

The International Accounting Standards Committee（IASC，国际会计准则委员会）was formed in 1973.Its objective in terms of standard setting is to work generally for the improvement and harmonization of regulations，accounting standards and procedures relating to the presentation of financial statements.In 2001，a new International Accounting Standards Board（IASB，国际会计准则理事会）was created.Its goal according to the new chair，is to increase the transparency（透明度）of financial reporting by achieving a single，global method of accounting.（注：Kieso&Donald E.，Intermediate Accounting，6th Canadian Edition，Vol.1，John Wiley&Sons Canada，Ltd.Etobicoke Ontario，2002，pp.10-11.）

Words and Terms Study

For each term listed in the left column，find the corresponding description in the right column and place the appropriate letter in the blank.

Review Exercises&Problems

A.Decide whether the following statements are true（T）or false（F）.

1.Investors are an example of internal users of accounting information.（　　）

2.Managerial accounting provides information only for the business management.（　　）

3.Bookkeeping is only one part of the accounting process.（　　）

4.Under the Historical Cost Principle，an asset should be recorded at its original cost and the cost amount should not be adjusted afterwards.（　　）

5.The Going Concern Assumption states that a business will continue its operation forever.（　　）

B.Questions.

1.Briefly outline the meaning of Accounting.

2.Distinguish the major differences between financial accounting and managerial accounting.

3.Name some external parties that may be interested in the financial data of a business.

C.Translation.

A business that is owned and controlled by one person is considered to be a sole trader.This form of business ownership is simple and generally inexpensive.The owner of a sole trader is entitled to make all the decisions in the organisation and retain all the profits.A partnership is an organisation where two or more persons（partners）own and control a business.In a partnership，it is normal for each partner to have unlimited liability for debts of the business.In addition，partnerships have a limited life，and can be dissolved on the death or retirement of a partner.

A corporation is a business that is organized as a separate legal entity under the law.Corporations are owned by shareholders who contribute to the capital of the business by buying shares in the corporation.The shareholders are not personally liable for the debts of the corporation.In most corporations，control of the affairs of the corporation is maintained by a board of directors who are elected by shareholders.