Introduction to Accounting and Finance | Assignment For Lecture #1

 Introduction to Accounting and Finance


Accounting is the process through which we measure, record, and communicate the results of economic activities. It plays a vital role in collecting, summarizing, and reporting financial information to assist in decision-making. Accounting provides a clear picture of a business’s financial performance and position, which is essential for planning and growth.



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Branches of Accounting


1. Financial Accounting


This branch focuses on preparing financial statements for external users such as investors, creditors, and regulatory authorities. It presents a company’s financial performance and position over a specific period.


2. Management Accounting


Management accounting provides internal information to managers to help in planning, controlling, and decision-making. It focuses on improving efficiency and achieving organizational goals.


3. Tax Accounting


Tax accounting deals with taxation matters and ensures compliance with tax laws and regulations. It helps businesses plan and file their taxes correctly.



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Types of Business Organizations


1. Sole Proprietorship (One-Man Show)


A sole proprietorship is owned and managed by a single individual. The owner enjoys all profits but also bears unlimited liability, meaning personal assets can be used to pay business debts.


2. Partnership


A partnership is owned by two or more people who pool their resources, share profits, and bear losses together. Partnerships are easier to form but partners also have unlimited liability.


3. Company


A company is an organization registered under the Companies Ordinance 1984. It is considered an artificial legal person that exists separately from its owners.



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Features of a Company


(a) Artificial Person:

Created by law, a company has its own legal identity.


(b) Perpetual Succession:

The company continues to exist even if ownership changes.


(c) Separation of Ownership and Management:

Shareholders are the owners, but managers run the business.


(d) Divided Ownership:

Ownership is divided into small units called shares.


(e) Transferability of Shares:

Shares can be bought and sold freely between people.


(f) Limited Liability:

Owners are responsible only up to the amount of their investment.




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Types of Companies


1. Public Limited Company


Shares are offered to the general public and listed on the stock exchange. These companies are required to disclose their financial information publicly.


2. Private Limited Company


Shares are not offered to the public and not listed on the stock exchange. Ownership is usually restricted to a small group of people.



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Financial Accounting


All companies are legally required to publish their financial information — a process known as financial reporting.

The main tools of financial reporting are financial statements, and learning to prepare them is the essence of financial accounting.



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Major Financial Statements


1. Income Statement


Shows the profitability of a business by comparing revenues and expenses, resulting in profit or loss over a specific period.


2. Balance Sheet


Presents the financial position of a company at a specific date by listing assets, liabilities, and equity.


3. Cash Flow Statement


Provides information about cash inflows and outflows during a period, showing how cash is generated and used in operations, investments, and financing.



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Conclusion


Accounting is the backbone of every business organization. Through financial reporting, it ensures transparency and accountability by preparing accurate financial statements for external users.

A strong understanding of accounting principles and business structures builds a solid foundation for future studies in Business Administration, helping students and professionals make informed financial decisions.


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✍️ Author: Saifullah Khan

🎓 Program: BBA

🏫 University: Karakoram International University

📚 Subject: Financial Accounting – Lecture 1

📅 Semester: Fall 2025


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