Topic: Accounting
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Principles of Accounting
This is one of a series of subject guides published by the University. We regret that due to pressure of work the author is unable to enter into any correspondence relating to, or arising from, the guide. If you have any comments on this subject guide, favourable or unfavourable, please use the form at the back of this guide.
This subject guide is written for those of you who are studying Principles of Accounting. The unit is intended as a broad introduction to the subject, both for non-specialist students, and as a foundation for further study in the area.
From the outside, accounting can appear to be a purely practical subject. It would be very easy to focus on just the applications of techniques and procedures. But accounting is more than just a set of calculations; unless we can understand and interpret the figures we produce, the calculations are pointless! Accounting provides information for a wide variety of different users and purposes, and its practices can only be properly understood and assessed in relation to the economic and social environment in which they are applied. Therefore there are four aspects to this subject:
1. Techniques for recording, calculation, classification and reporting of accounting information. 2. The legal and institutional background associated with accounting information. 3. The economic and administrative problems which the information is required to solve. 4. The interpretation of reports prepared using 1 in the light of 2 and 3
The study of accounting is traditionally divided into two parts according to the types of users of the accounting information. Financial accounting is primarily concerned with the needs of users outside the business (or other organisation). Therefore it relates to the external control and management of resources (for example, byshareholders of the company in which they have invested their funds, or by banks making loans). A key part of financial accounting is reporting the performance and position of the business to these external users, via the financial statements . The form and content of financial statements is usually highly regulated. In contrast, management accounting is concerned with the needs of users inside the business. Therefore it relates to the internal control and management of resources (for example, by the directors, management or employees of a company). Management accounting statements may be more detailed than those prepared for external users, and do not normally need to meet any legal requirements.
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