the role of accounting in economy, business and finance
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The role of accounting in economy, business and finance. BA 344 Special Topics in Accounting and Auditing. Dr. Yasemin ZENGİN KARAİBRAHİMOĞLU. Accountant !!!!!!!!!!!!. Is it possible to run a business without an accountant ? - PowerPoint PPT PresentationTRANSCRIPT
THE ROLE OF ACCOUNTING IN ECONOMY, BUSINESS
AND FINANCE
BA 344 Special Topics in Accounting and Auditing
Dr. Yasemin ZENGİN KARAİBRAHİMOĞLU
Is it possible to run a business without an accountant?
YES YOU CAN RUN A BUSINESS WITHOUT AN ACCOUNTANT, ONLY IF YOU CAN DRIVE A CAR WITHOUT FUEL!!!!!!!!!!!!!!!!!!!
BOOKKEEPING!!!
Accountant !!!!!!!!!!!!
Reference: Mugan-Akman 2007
Environment of a Business Organization
Reference: Mugan-Akman 2007
Business Activities
Operating Activities
Financing Activities
Investing Activities
AccountingFinance
Marketing & Sales
Production
Human Resources
Management
Accounting Information in a Business
What is Accounting? Accounting is an information system Accounting is the language of a business
Users of Accounting Information
Financial Accounting
Managerial Accounting Cost Accounting
Fields of Accounting
Accounting lies at the heart of business. It is possible to survive, for a while at
least, without an effective marketing plan, poor human resource management and indeed a poorly designed business strategy. However, if there are serious faults with the management and control of the business’s financial systems, it will fail.
Role of Accounting in a Business
Basic Roles; Measuring, recording,
analyzing, summarizing and reporting economic activities
Fullfil the information need of internal and external users
Provide management with information to assist them in their decision making and other activities.
Role of Accounting in a Business
Financial AccountingManagement AccountingCost Accounting
Beside recording, summarizing, and reporting; Accounting and Stewardship Accounting and Control Accounting and Planning Accounting and Information
Role of Accounting in Today’s Business
Primary Financial Statements Income Statement Statement of Changes in Equity Balance Sheet- Statement of Financial
Position Cash Flow Statement (or Statement of
Cash Flows) NOTES
Income Statement Summarizes the revenues and expenses of
an entity for a certain period in time Reveals the results of operations during a
period Shows whether an entity is successful in
achieving the goal of profitability
Example of an Income Statement TURKCELL-English TURKCELL-Turkish
Statement of Changes in Equity
14-28
Summarizes the transactions that affect the shareholders’ equity in a given period
Increases in the share capital or payments of dividends to shareholders during the period are presented
Example of a Statement of Changes in Equity TURKCELL-English TURKCELL-Turkish
Balance Sheet Reports financial situation of a company Gives information about a company’s
assets, liabilities and capital. Snapshot of the financial position at a
given date
Example of a Balance Sheet TURKCELL-English TURKCELL-Turkish
Cash Flow Statement Deals with cash in-flows and out-flows
company resulting from operating, financing and investing activities for a specific period
Presents information regarding the goal of liquidity
Example of a Cash Flow Statement TURKCELL-English TURKCELL-Turkish
Auditing and Auditors’ Opinion Independent audit of financial
statements: the examination of the financial statements,
accounting system and internal controls, and the accounting records of a company
purpose of an independent audit is to express an opinion on the financial statements- whether they are prepared in accordance with
the generally accepted accounting principles whether they fairly present the financial
position of the company auditors’ report implies that the financial
statements are free of material misstatements
Unqualified opinion: (The Best) A clean opinion meaning that the financial statements appear to be presented fairly.
Qualified opinion: The auditor finds some situations that don't comply with GAAP. The auditor determines the financial statements are presented fairly except for (the situation that doesn't comply) and declares the reasons.
Disclaimer opinion: The auditor doesn't want to or can't give an opinion on whatever's being audited.
Adverse opinion: (The Worst) It states that the financial statements do not fairly present the financial position, results of operations, and changes in financial position, in conformity with generally accepted accounting principles.
Types of Auditors’ Opinion
Regulatory Bodies National
Capital Markets Board (CMB) Ministry of Finance TURMOB (Union of Chambers of Certified Public
Accountants of Turkey) Turkish Accounting Standards Board (TASB)-
Changed on 26/09/2011 Public Oversight, Accounting and Auditing Standards
Authority International
International Federation of Accountants (IFAC) International Accounting Standards Board (IASB)-
International Financial Reporting Standards (IFRS) Financial Accounting Standards Board (FASB) -US
Development of Accounting Commercial transaction records - 3600 BC Accounting in ancient times and Middle Ages- clay
tokens & money- single-entry system Evolution of Double Entry System- Accumulation of
wealth - Fra Luca Bartolomeo de Pacioli- in 1494- Summa de arithmetica
19th century – distinction between creditors and owners - national accounting standards
Early 20th century - standardization of financial reports End of the 20th century, these developments had
resulted in the global standardization of accounting standards, and in the beginning of the 21st century, the International Financial Reporting Standards were issued
Development of Accounting in Turkey Commercial Code of 1850 - translation of the
French Commercial Code A second Commercial Code was enacted in 1926-
based on the German commerce and company laws that controlled the accounting rules
1950s on- American expertise has been utilized and the Turkish economic system - heavily influenced by the American system
A new Commercial Code came into effect in 1956 Istanbul Stock Exchange (ISE) came out in 1984;
full operations started in 1986.The foundation of the Capital Markets Board (CMB) and the Istanbul stock exchange, and the increase in foreign investments
The first set of financial accounting standards was developed in January 1989 by the CMB, to be effective for the fiscal years that started on or after January 1, 1989
The Ministry of Finance published the committee’s report in a communiqué on 26 December 1992, establishing the principles and the uniform chart of accounts to be in effect starting 1 January 1994
Turkish Accounting and Auditing Standards Board (TAASB) was founded in 1994
Turkish Accounting Standards Board (TASB-IFRS) First set of Turkish Accounting Standards to be effective in 2006 which are converged with IFRS (2005)
Development of Accounting in Turkey
Full set of Turkish Accounting Standards (TMSs)/Turkish Financial Reporting Standards (TFRSs) fully convergent with the IASs /IFRSs by TASB (2010)
New Turkish Commercial Code which requires all the companies to use TMS/TFRS and subject to audit and give authority to TUDESK to set the Turkish Auditing Standards (2011)
Turkish Financial Reporting Standards for SMEs (TFRS for SMEs) to be effective in 2013 (2010)
Public Oversight, Accounting and Auditing Standards Authority(2011)
Development of Accounting in Turkey
Accounting is a back bone of economic development. Accounting in Investment & Financial Appraisal Accounting for Efficient Markets Cost function of Accounting for Economic
Development Fraud, Accounting & Economy Accounting, Financial Services &Economy
Accounting is the language of business to communicate the results with others, without
accounting information there will be confusion in the whole society and economy.
Role of Accounting in Economy
Accounting information for Prosopective Analysis - Firm Valuation Enterprise Risk Management Strategic scenario planning Capital budgeting and management Financial Management
Role of Accounting in Finance
Myth 1: Accounting is boring
Myth 2: Accounting is mathematical
Myth 3: There is a lot to learn
Myth 4: It is all done by computers by those days-accountants are obsolete
Myths about Accounting
Welcome to the world of accounting…