accounting information: users and uses accounting information: users and uses c h a p t e r 1
TRANSCRIPT
Learning Objective 1
Describe the purpose of accounting and explain its role in business and society.
What are the functions of anaccounting system?
Analyze business events to determine if information should be captured by the accounting system.
Analysis
Day-to-day keeping track of things.
Bookkeeping
Use summary information to evaluate the financial health and performance of the business.
Evaluation
What is the Nature of Accounting? Explain What Each Term Means.
Deals with numbers.Quantitative
Focused on the financial dimension of business.
Financial
Supported by a theoretical conceptual framework.
Useful
Past information can only be useful if it impacts decisions about the future.
Decision Making
What Are the Four Steps of the Decision-making Process?
1Step
Identify the issue
2Step
Gather information
3Step
Identify alternatives
4Step
Select the option that will most
likely result in the
desired objective
Sources of Sources of Business CapitalBusiness Capital
What are the Sources of Business Capital?
Creditors (Lenders)
Business Earnings
Investors (Owners)
Uses of Business Resources
What are Uses of Business Resources?
Buy materials and supplies
Buy land, buildings, and equipment
Pay employees
Pay other operating expenses
Why Do Businesses Perform the Following Functions?
To produce and market goods and services (resulting in revenues)
Buy materials and supplies
Buy land, buildings, and equipment
Pay employees
Pay other operating expenses
How is the Revenue a Business Generates Used?
Produce and market goods and services (resulting in revenues)
Pay a return to owners
Pay loans
Pay taxes
Continue business activity
1. Analyze business event
Describe The Accounting Describe The Accounting CycleCycle
2. Record,
3. Classify, and
4. Summarize transaction
5. Report summaries
Balance sheet, Income statement, Statement of cash
flows
Account, amount, classification
Investment, purchase, sale, or
transaction
What are the Two Types of Reports from Accounting Information?
Internal Reports(Management Accounting)
External Reports(Financial Accounting)
Management
LendersInvestors
Suppliers/CustomersEmployees
CompetitorsGovernment Agencies
The Press
What Are Accounting Reports Used For?
Used by management for
• planning• implementing plans• controlling costs• making decisions
Used by external parties who have an economic interest in the firm.
• Balance sheet• Income statement• Statement of cash flows
Learning Objective 3
Describe the environment of accounting, including the effects of generally accepted accounting principles, international business, ethical considerations, and technology.
Accounting EnvironmentAccountants follow generally accepted accounting
principles (GAAP), which are authoritative guidelines that define accounting practice at a
particular time.
1. Financial statements must be comparable and reliable.
2. External users need to understand the rules and assumptions used by companies when constructing financial statements.
What are the Standard-Setting Organizations in the United States?
CongressCongress
Wanted to regulate U.S.
stock exchanges.
SECSEC
Created to make sure investors are provided
with full and fair information on publicly traded
companies.
FASBFASB
Publicly supported by SEC to set U.S.
accounting standards for
companies soliciting
investment funds.
What is a CPA?
CPA: Certified Public Accountant
• Has taken a minimum number of college-level accounting classes.
• Has passed the exam administered by the AICPA.• Has met other requirements set by his/her state.
AICPA: American Institute of Certified Public Accountants
• The national organization of CPAs in the U.S.• Not a government agency.
Name Some Other Accounting Organizations
AICPA: American Institute of Certified Public AccountantsNational organization of certified public accountants (CPAs)
IMA: Institute of Management AccountantsNational organization of management accountants (CMAs)
IRS: Internal Revenue ServiceGovernment agency--prescribes rules and regulates the collection of tax revenues in the U.S.
SEC: Securities and Exchange CommissionCreated by Congress to regulate U.S. stock exchanges.
IASC: International Accounting Standards CommitteeFormed to develop worldwide accounting standards.
The Code of Professional Conduct.
Adopted by the AICPA.
Holds to what three key principles?
Integrity
Objectivity
Independence
Ethics in Accounting
Members are subject to
disciplinary action.
What are Three Advantages of Technology?
Allows companies to easily gather vast amounts of information about individual transactions.
Allows large amounts of data to be compiled quickly and accurately, significantly reducing error.
Creditors and investors can receive and process large amounts of data.
Why Doesn’t Technology Replace People?
Because technology does not replace judgment.
People must still analyze situations and input results.
People must still analyze output.
Why Study Accounting?
Everyone makes financial decisions.What types of decisions?
Budgeting Investing
Buying vs. leasing
Financing
Accounting Opportunities
Industry
Government or Nonprofit
GraduateEducation
PublicAccounting Auditor
Tax Consultant
Management Advisory Services
Consultant
Controller
Internal Auditor
Financial Executive
Government Agencies: GAO,
IRS, FBI
State and Local Agencies
Hospitals, Schools, Nonprofit
Organizations
J.D. (Law)
Ph.D.
M.Acc.
MBA