Discuss the language of accounting and identify the uses and the application of accounting information for various users. (Ex. investors and creditors).

Assignment Brief

ACC120 Accounting Basics I

Subject Description 

This course introduces the student to how accounting information is used by, and meets the needs of both internal and external users through effective and efficient communication as well as what accounting information is required by a business concern to reflect clearly the operating results of the enterprise over its operating life. Throughout the course, students will be introduced to generally accepted accounting principles,the interpretation and preparation of financial statements and how this information is recorded in the various business records. Discuss the language of accounting and identify the uses and the application of accounting information for various users. (Ex. investors and creditors).

Learning Outcomes: ACC120 Accounting Basics I 
Upon successful completion of this subject the student will be able to:

1. Discuss the language of accounting and identify the uses and the application of accounting information for various users. (Ex. investors and creditors).
2. Demonstrate an understanding for each of the components of GAAP and financial statement concepts. Recognize and explain the correct application of these concepts.
3. Explain the nature, the general purpose, and interrelationships of the Balance Sheet and the Statements of Income, Retained Earnings and Cash Flow. Discuss how transactions that an enterprise enters into affect these statements and affect decisions of the users.
4. Demonstrate an understanding of the recording process for accounting information:- record the more common adjustments necessary at the end of an accounting period;
   • produce the financial statements that are required for both service and merchandise organizations;
   • understand the procedures required in closing the books to complete the "accounting cycle".
5. Explain the broad principles of cash management and the specific internal control and accounting procedures relating to cash and temporary investment transactions. Explain the purpose of and prepare the bank reconciliation.
6. Account for and explain the treatment of Receivables in general purpose financial accounting.
7. Describe and analyze Merchandising activities and Cost of Goods Sold. Explain the Perpetual and Periodic systems of recording inventory. Discuss the advantages and disadvantages of each system.
8. Discuss the language of accounting and identify the uses and the application of accounting information for various users. (Ex. investors and creditors).

Sample Answer

ACC120 – Accounting Basics I Summary Report

Introduction

Accounting is often called the language of business. It helps people understand the financial health of an organisation. This course, Accounting Basics I, introduces students to the key principles of accounting, how financial information is recorded, and how this information is used by different people such as investors, creditors, managers, and regulators. The course also covers how businesses prepare and use financial statements, how to manage cash, and how to handle inventory and receivables.

1. The Language and Use of Accounting

Accounting uses a common language made up of rules, terms, and formats to report financial information. This allows users to understand how a business is performing.

• Users of accounting information include:

  • Investors – to decide whether to invest in a company.

  • Creditors – to assess if a business can repay its loans.

  • Managers – to plan budgets and make internal decisions.

  • Government agencies – for tax and legal purposes.

Accounting helps all these users make informed decisions by providing clear financial data.

2. GAAP and Financial Statement Concepts

GAAP (Generally Accepted Accounting Principles) are rules and guidelines that standardise accounting practices.

• Key components of GAAP include:

  • Consistency – using the same methods each year.

  • Relevance – information must be useful.

  • Reliability – information must be accurate.

  • Comparability – users should be able to compare statements over time.

Students also learn how these rules affect financial reports and the decisions made by users.

3. Financial Statements and Their Interrelationships

There are four main financial statements:

• Balance Sheet – shows a company’s assets, liabilities, and equity.

• Income Statement – reports income and expenses.

• Retained Earnings Statement – explains changes in retained profits.

• Cash Flow Statement – shows cash inflows and outflows.

These statements are connected. For example, net income from the income statement affects both the retained earnings and cash flow.

Every business transaction (like sales, purchases, or borrowing) impacts one or more of these statements. Understanding this helps users analyse a business’s health.

4. The Recording Process and Accounting Cycle

Students learn how to:

• Record transactions in journals and ledgers.

• Make adjusting entries at the end of the accounting period.

• Prepare financial statements for both service (e.g., a salon) and merchandise businesses (e.g., a clothing store).

• Close the books to complete the accounting cycle.

This process ensures accurate reporting and gives a full view of the business’s performance.

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