In the previous chapters, we explored the ecosystem of financial markets and institutions. Now, we turn to a concept so fundamental that it underpins almost every financial decision ever made: the Time Value of Money ( TVM ) . This chapter introduces the core principles, definitions, and calculations that form the bedrock of valuation . 3.1 Introduction to Time Value of Money Would you rather have €100 today or €100 one year from today? Intuitively, you would choose to have the money today. This simple preference illustrates the most important concept in finance: a dollar (or euro) today is worth more than a dollar tomorrow. This is not because of inflation , though that can be a factor. It is because of money's earning potential : If you have €100 today, you can invest it. In a year, that investment could grow to €102, €105, or even more. The €100 you receive in the future cannot be invested until you receive it, and you therefore miss out on that entire period of potential growt...
Description
This course introduces the essential principles, concepts, and practices of financial accounting. You will learn how financial transactions are recorded, classified, summarized, and interpreted, and how to prepare key financial statements in line with globally recognized frameworks such as Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). Designed to build both competence and confidence, this course equips you with the analytical skills to interpret financial information and apply it to real-world decision-making—whether you are managing a business, investing, or advancing your career.
What You Will Achieve: Course Objectives
By the end of this course, you will be able to:
- Explain the purpose and role of financial accounting in business and society.
- Apply core accounting principles and standards to record and report business transactions.
- ·Use the double-entry bookkeeping system to maintain accurate financial records.
- Prepare and interpret the primary financial statements: the Income Statement, Balance Sheet, and Statement of Cash Flows.
- Distinguish between key accounting concepts, assumptions, and conventions that shape financial reporting.
- Analyze financial information to support informed decision-making by managers, investors, and other stakeholders.
Learning Outcomes: Your New Skills
Upon successful completion, you will have the practical ability to:
- Identify the various users of accounting information and their specific needs.
- Apply the accounting equation to analyze how transactions affect a company's financial position.
- Prepare journals, ledgers, and trial balances as part of the accounting cycle.
- Prepare complete financial statements for different business structures (e.g., sole proprietorships).
- Account for major categories of assets, liabilities, equity, income, and expenses.
- Apply foundational financial statement analysis techniques, such as ratio analysis, to assess business performance.
Your Learning Journey: Course Modules
The course is structured into 10 clear modules, each building on the last to form a complete understanding.
➡Module 1: Introduction to Financial Accounting
What is accounting, and why does it matter?
- The meaning and nature of accounting
- Key objectives and functions of financial reporting
- Who uses accounting information and why?
- Overview of different accounting branches (Financial, Management, Cost)
- The vital role of accounting in business and economic society
➡Module 2: The Framework: Concepts, Principles & Standards
The rules of the financial reporting language.
- Foundational accounting assumptions (Going Concern, Accrual Basis, Consistency)
- Core accounting principles (Matching, Prudence, Materiality)
- Important accounting conventions
- Introduction to GAAP and IFRS: the global rulebooks
- Ethics and professional responsibility in accounting
➡Module 3: The Accounting Engine: Equation & Double-Entry System
How every transaction is captured with perfect balance.
- The fundamental accounting equation: Assets = Liabilities + Equity
- Defining assets, liabilities, and equity
- The rules of debit and credit
- Mechanics of the double-entry bookkeeping system
- Analyzing the impact of any transaction on the accounting equation
➡Module 4: Recording Business Transactions
The step-by-step process from receipt to record.
- Identifying and using source documents (invoices, receipts)
- Recording transactions with journal entries
- Using special-purpose subsidiary books (e.g., Sales, Purchases journals)
- Posting entries to the general ledger
- Balancing off ledger accounts
➡Module 5: The Trial Balance and Error Correction
Checking your work and fixing mistakes.
- Purpose and preparation of a trial balance
- Types of common accounting errors
- Techniques for identifying and rectifying errors
- Using a suspense account to temporarily balance the books
➡Module 6: Preparing Financial Statements
Telling the financial story of a business.
- The importance and structure of financial statements
- Preparing the Income Statement (Statement of Profit or Loss)
- Preparing the Statement of Financial Position (Balance Sheet)
- Overview of the Statement of Cash Flows
- Understanding notes to the financial statements
➡Module 7: Accounting for Assets
How a business records what it owns.
- Classifying current and non-current assets
- Accounting for cash, receivables, and allowances
- Inventory valuation methods (FIFO, LIFO, Weighted Average)
- Accounting for Property, Plant & Equipment (PPE)
- Calculating and recording depreciation (Straight-line, Reducing balance)
➡Module 8: Accounting for Liabilities and Equity
How a business records what it owes and what belongs to owners.
- Distinguishing between current and non-current liabilities
- Accounting for payables, loans, and provisions
- Understanding capital, reserves, and retained earnings
- Accounting for owner's drawings and corporate dividends
- Structure of owner’s equity vs. shareholders’ equity
➡Module 9: Adjustments and Closing the Books
Ensuring financial statements are accurate and complete.
- Making period-end adjustments for accruals and prepayments
- Finalizing depreciation and provision entries
- Preparing an adjusted trial balance
- Passing closing entries to reset income and expense accounts
- Preparing final accounts with all adjustments incorporated
➡Module 10: Introduction to Financial Statement Analysis
Turning numbers into insight.
- The purpose and process of financial analysis
- Key ratio analysis: Liquidity, Profitability, Solvency, and Efficiency
- Understanding the limitations of financial statements
- Interpreting results to assess financial health and performance
How You Will Learn
This course employs a practical, engaging approach:
- Conceptual Lectures: Clear explanations of principles and standards.
- Applied Exercises & Problem-Solving: Hands-on practice with guided solutions.
- Real-World Case Studies: See how accounting applies in actual business scenarios.
- Interactive Tutorials: Activities designed to reinforce understanding and encourage application.
Knowledge Checks & Self-Assessment
To help you track your progress, the course includes:
- Module Quizzes: Check your understanding of key concepts.
- Practical Assignments: Apply your skills to comprehensive problems.
- Case Study Analyses: Develop your interpretive and decision-making abilities.
- Final Course Review: A capstone assessment to confirm your mastery of the material.
Core Learning Resources
Primary Texts:
- Weylandt, J. J., Kimmel, P. D., & Kieso, D. E. Financial Accounting
- Atrill, P., & McLaney, E. Accounting and Finance for Non-Specialists
- International Accounting Standards Board (IASB). IFRS Standards
Supplementary & Free Resources:
- IFRS Foundation website: For the latest standards and guidance.
- Investopedia Accounting Tutorials: For clear, concise reference material.
- Khan Academy – Financial Accounting: For free video lectures and practice.
- Open Educational Resources (OER): For additional textbooks and learning materials.
Course Approach
This course is designed to be accessible and self-paced. Engagement with the practical exercises and tutorials is highly recommended to build proficiency. The sequential module structure ensures a logical progression from fundamental principles to advanced application and analysis.
Financial Accounting: Principles & Practice /E-cyclopedia Resources by Kateule Sydney is licensed under CC BY-SA 4.0
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