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The role of accounting in economy, business and finance

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 ?

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The role of accounting in economy, business and finance

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  1. The role of accounting in economy, business and finance BA 344 Special Topics in Accounting and Auditing Dr. Yasemin ZENGİN KARAİBRAHİMOĞLU

  2. Accountant !!!!!!!!!!!! Is it possibletorun a businesswithout an accountant? YES YOU CAN RUN A BUSINESS WITHOUT AN ACCOUNTANT, ONLY IF YOU CAN DRIVE A CAR WITHOUT FUEL!!!!!!!!!!!!!!!!!!! BOOKKEEPING!!!

  3. Environment of a Business Organization

  4. Business Activities OperatingActivities Financing Activities Investing Activities

  5. AccountingInformation in a Business

  6. What is Accounting? Accounting is an informationsystem Accounting is the language of a business

  7. Users of Accounting Information

  8. Fields of Accounting • Financial Accounting • Managerial Accounting • Cost Accounting

  9. Role of Accounting in a Business Accounting lies at the heart of business. It is possible to survive, for a while at least, withoutan effective marketing plan, poor human resource management and indeed a poorly designed businessstrategy. However, if there are serious faults with the management and control of the business’s financialsystems, it will fail.

  10. Role of Accounting in a Business • BasicRoles; • Measuring, recording, analyzing, summarizingandreportingeconomicactivities • Fullfiltheinformationneed of internalandexternalusers • Providemanagementwithinformationtoassistthem in theirdecisionmakingandotheractivities.

  11. Role of Accounting in Today’sBusiness • Beside recording, summarizing, andreporting; • Accounting and Stewardship • Accounting and Control • Accounting and Planning • Accounting and Information

  12. Primary Financial Statements Income Statement Statement of Changes in Equity Balance Sheet- Statement of FinancialPosition Cash Flow Statement (or Statement of Cash Flows) NOTES

  13. Income Statement Summarizesthe revenues and expenses of an entity for a certain period in time Revealsthe results of operations during a period Showswhether an entity is successful in achieving the goal of profitability Example of an Income Statement TURKCELL-English TURKCELL-Turkish

  14. Statement of Changes in Equity Summarizesthe transactions that affect the shareholders’ equity in a given period Increasesin 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

  15. 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

  16. Cash Flow Statement Dealswith 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 CashFlowStatement TURKCELL-English TURKCELL-Turkish

  17. 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 materialmisstatements

  18. Types of Auditors’ Opinion 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: (TheWorst) 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.

  19. 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)- Changedon 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

  20. Development of Accounting Commercialtransaction records - 3600 BC Accounting in ancienttimesandMiddleAges- claytokens & money- single-entrysystem Evolution of DoubleEntrySystem- Accumulation of wealth - FraLuca Bartolomeo de Pacioli- in 1494- Summa de arithmetica 19th century – distinction between creditors and owners - national accounting standards Early20th century - standardization of financial reports Endof 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

  21. Development of Accounting in Turkey Commercial Code of 1850 - translation of the French Commercial Code Asecond 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

  22. Development of Accounting in Turkey 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)

  23. 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)

  24. Role of Accounting in Economy • Accounting is a back bone of economic development. • Accounting in Investment & Financial Appraisal • AccountingforEfficientMarkets • Costfunction of AccountingforEconomicDevelopment • Fraud, Accounting & Economy • Accounting, FinancialServices &Economy Accounting is thelanguage of businesstocommunicatetheresultswithothers, withoutaccountinginformationtherewill be confusion in thewholesocietyandeconomy.

  25. Role of Accounting in Finance • Accountinginformationfor • Prosopective Analysis - Firm Valuation • Enterprise Risk Management • Strategic scenario planning • Capitalbudgeting and management • Financial Management

  26. MythsaboutAccounting Myth 1: Accounting is boring Myth 2: Accounting is mathematical Myth 3: There is a lot to learn Myth 4: It is all done bycomputersbythosedays-accountantsareobsolete

  27. Welcome to the world of accounting…

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