FUNDAMENTALS OF FINANCIAL MANAGEMENT
YEAR 1
Financial Accounting Session 1: Introduction to Accounting
Accounting is the function that provides financial data (accurate, timely and useful data).
The necessity of Accounting
Accounting provides information to owners and managers so they can make prudent,
intelligent business decisions.
- accounting contains financial knowledge and planning skills → crucial to survival and
growth of any businesses
Why Study Accounting
Accounting is a valuable tool for your professional career → good knowledge of how to make
crucial economic decisions
- Successful careers often depend on an ability to make daily operating decisions
based upon analyses of financial information
- Makes is possible to illustrate accounting principles with practical, concrete examples
→ once individuals master accounting terminology, concepts and procedures,
accounting practices are not so difficult to understand.
What is Business Accounting
Fundamental purpose of accounting is provide accurate, useful and timely financial
information
Accounting involves recording business transactions, analyzing business records and
reports, and producing reliable information
Bookkeeping is the initial phase of accounting and is only part of the overall function of
accounting → keeping track of a business's financial transactions
Accounting data is used to produce several different kinds of reports, such as formal
financial statements, one-line messages (that is, cash balance, receivables), graphs, and
statistical data.
The “Bean Counter” Myth
Accountants make decisions to eliminate jobs or reduce money
- The name is referred to accountants : used as a derogatory (denigrerende) term for
fussy and pedantic accountant that nitpicks over small things to save costs.
Branches of Accounting
Six distinct (overlapping) branches
1. Financial accounting: recording, classifying and summarizing transactions → deals
with past events
2. Cost accounting: recording, classification, allocation and reporting of prospective
cost
3. Managerial accounting: provides information for use by internal users
4. Tax accounting: preparation and filing of tax forms with governmental agencies
5. Auditing: reviewing and evaluating documents, records, and control systems →
either external or internal
6. Accounting systems: review the information systems of hospitality organizations
1
,Why Financial Statements are Necessary
- Investors: analyze the quality of a potential investment or current stock holding.
- Banks: to decide whether to loan money
- Creditors: to identify any risk involved in doing business with customers on an open
line of credit
users:
- External users: outside of a business (investors, banks, suppliers)
- Internal users: management of the company (directors, president, officers)
Business Transactions
Initiate the accounting process : the exchange of merchandise, property, or services for cash
or a promise to pay = lening
- Account payable: a
- company’s promise to pay (short-term obligations owed to its creditors or suppliers)
- Account receivable: a guest’s promise to pay (funds that customers owe your
company for products or services that have been invoiced)
- Mortgage payable: liability of a property owner to pay a loan that is secured by
property (land or building)
Double-entry system: every business transaction affects two or more bookkeeping
accounts
- Equal dollar amounts of debits and credits are entered for each business transaction
- Does not relate to addition and subtraction
- Business transactions are recorded in terms of whether their associated events
increase of decrease the affected business accounts
Financial Accounting Session 2: The fundamental accounting Equation
The accounting Equation = mutatie balans
Bookkeeping accounts consist 5 classifications:
1. Assets (bezit) (value that belongs to the business)) → building, cars, furniture, cash,
possessions and purchased rights
2. Liabilities (schulden) → debts of a business (pay it later)
3. Owners Equity → owners financial interest in the business
4. Revenue (winst) → all the sales , mostly roomsales
5. Expenses (uitgaven) → payroll, electricity, gas, water
Revenue - Expenses = Profit
Assets = liabilities + Equity
A = L + EQ
Double entry accounting: process in which every business transaction affects two or more
bookkeeping accounts
2
, Bookkeeping Accounts
A bookkeeping account is an individual record for each account a business uses to record
its business transactions → are listed in an accounting document called chart of accounts
Account balance
Headen by its name, followed by entries consisting of a date, a source reference and an
amount (alleen inkomsten en uitgaven, geen credit , debet etc)
Financial statements
Two common , easily recognized financial statements:
- Balance sheet (statement of financial position) → shows the assets, liabilities and
equity of a business
- income statement (statement of operations) → shows the revenue , expenses and
the resulting profit or loss
Financial accounting Session 3: The generally accepted accounting principles and the
income statement
Principles of accounting GAAP
Accounting principles provide a uniform basis for preparing financial statements.
Cost Record the goods for the price you bought them
Business Entity Each business exists on their own and all the goods belong
to the business (company separate form the owner)
Continuity of the business You assume that the business keeps going
(Going Concern)
Unit of Measurement All reported currency must be reported in the same currency
(geldeenheid)
Objective Evidence All the transactions should be based on evidence
Full disclosure Concept in which a company must disclose all material
information related to finance to its shareholders (tell the
whole truth) → can be achieved by reporting the information
in the body or footnotes of financial statements
Consistency Using the same accounting methods every time → to make
reasonable comparisons
Matching Match the expenses with the related revenue → different
month (de uitgaven koppelen met de winst die daaruit volgt)
Conservatism Recognizing expenses as soon as possible, but delaying the
recognition of revenues until they are ensured → Je gaat dus
uit van een ‘worst-case scenario’.
Materiality When inventory decreases in value (makes a difference for
the income / revenue)
Revenue Cognition Revenues are recognized when they are realized or
realizable
3
YEAR 1
Financial Accounting Session 1: Introduction to Accounting
Accounting is the function that provides financial data (accurate, timely and useful data).
The necessity of Accounting
Accounting provides information to owners and managers so they can make prudent,
intelligent business decisions.
- accounting contains financial knowledge and planning skills → crucial to survival and
growth of any businesses
Why Study Accounting
Accounting is a valuable tool for your professional career → good knowledge of how to make
crucial economic decisions
- Successful careers often depend on an ability to make daily operating decisions
based upon analyses of financial information
- Makes is possible to illustrate accounting principles with practical, concrete examples
→ once individuals master accounting terminology, concepts and procedures,
accounting practices are not so difficult to understand.
What is Business Accounting
Fundamental purpose of accounting is provide accurate, useful and timely financial
information
Accounting involves recording business transactions, analyzing business records and
reports, and producing reliable information
Bookkeeping is the initial phase of accounting and is only part of the overall function of
accounting → keeping track of a business's financial transactions
Accounting data is used to produce several different kinds of reports, such as formal
financial statements, one-line messages (that is, cash balance, receivables), graphs, and
statistical data.
The “Bean Counter” Myth
Accountants make decisions to eliminate jobs or reduce money
- The name is referred to accountants : used as a derogatory (denigrerende) term for
fussy and pedantic accountant that nitpicks over small things to save costs.
Branches of Accounting
Six distinct (overlapping) branches
1. Financial accounting: recording, classifying and summarizing transactions → deals
with past events
2. Cost accounting: recording, classification, allocation and reporting of prospective
cost
3. Managerial accounting: provides information for use by internal users
4. Tax accounting: preparation and filing of tax forms with governmental agencies
5. Auditing: reviewing and evaluating documents, records, and control systems →
either external or internal
6. Accounting systems: review the information systems of hospitality organizations
1
,Why Financial Statements are Necessary
- Investors: analyze the quality of a potential investment or current stock holding.
- Banks: to decide whether to loan money
- Creditors: to identify any risk involved in doing business with customers on an open
line of credit
users:
- External users: outside of a business (investors, banks, suppliers)
- Internal users: management of the company (directors, president, officers)
Business Transactions
Initiate the accounting process : the exchange of merchandise, property, or services for cash
or a promise to pay = lening
- Account payable: a
- company’s promise to pay (short-term obligations owed to its creditors or suppliers)
- Account receivable: a guest’s promise to pay (funds that customers owe your
company for products or services that have been invoiced)
- Mortgage payable: liability of a property owner to pay a loan that is secured by
property (land or building)
Double-entry system: every business transaction affects two or more bookkeeping
accounts
- Equal dollar amounts of debits and credits are entered for each business transaction
- Does not relate to addition and subtraction
- Business transactions are recorded in terms of whether their associated events
increase of decrease the affected business accounts
Financial Accounting Session 2: The fundamental accounting Equation
The accounting Equation = mutatie balans
Bookkeeping accounts consist 5 classifications:
1. Assets (bezit) (value that belongs to the business)) → building, cars, furniture, cash,
possessions and purchased rights
2. Liabilities (schulden) → debts of a business (pay it later)
3. Owners Equity → owners financial interest in the business
4. Revenue (winst) → all the sales , mostly roomsales
5. Expenses (uitgaven) → payroll, electricity, gas, water
Revenue - Expenses = Profit
Assets = liabilities + Equity
A = L + EQ
Double entry accounting: process in which every business transaction affects two or more
bookkeeping accounts
2
, Bookkeeping Accounts
A bookkeeping account is an individual record for each account a business uses to record
its business transactions → are listed in an accounting document called chart of accounts
Account balance
Headen by its name, followed by entries consisting of a date, a source reference and an
amount (alleen inkomsten en uitgaven, geen credit , debet etc)
Financial statements
Two common , easily recognized financial statements:
- Balance sheet (statement of financial position) → shows the assets, liabilities and
equity of a business
- income statement (statement of operations) → shows the revenue , expenses and
the resulting profit or loss
Financial accounting Session 3: The generally accepted accounting principles and the
income statement
Principles of accounting GAAP
Accounting principles provide a uniform basis for preparing financial statements.
Cost Record the goods for the price you bought them
Business Entity Each business exists on their own and all the goods belong
to the business (company separate form the owner)
Continuity of the business You assume that the business keeps going
(Going Concern)
Unit of Measurement All reported currency must be reported in the same currency
(geldeenheid)
Objective Evidence All the transactions should be based on evidence
Full disclosure Concept in which a company must disclose all material
information related to finance to its shareholders (tell the
whole truth) → can be achieved by reporting the information
in the body or footnotes of financial statements
Consistency Using the same accounting methods every time → to make
reasonable comparisons
Matching Match the expenses with the related revenue → different
month (de uitgaven koppelen met de winst die daaruit volgt)
Conservatism Recognizing expenses as soon as possible, but delaying the
recognition of revenues until they are ensured → Je gaat dus
uit van een ‘worst-case scenario’.
Materiality When inventory decreases in value (makes a difference for
the income / revenue)
Revenue Cognition Revenues are recognized when they are realized or
realizable
3
