Embed Size (px)
Citation preview
© The McGraw-Hill Companies, Inc., 2003McGraw-Hill/Irwin
Slide 1-1
ACCOUNTING:Information for Decision Making
Chapter
1
© The McGraw-Hill Companies, Inc., 2003McGraw-Hill/Irwin
Slide 1-2
Accounting
information
The accounting
process
Decision makers
Economic activities
Actions (decisions)
Accounting “links” decision
makers with economic
activities and with the results of
their decisions.
© The McGraw-Hill Companies, Inc., 2003McGraw-Hill/Irwin
Slide 1-3
Types of Accounting InformationTypes of Accounting Information
Financial
Managerial
Tax
© The McGraw-Hill Companies, Inc., 2003McGraw-Hill/Irwin
Slide 1-4
Information Users
InvestorsCreditors ManagersOwnersCustomersEmployeesRegulators -SEC -IRS -EPA
Information Users
InvestorsCreditors ManagersOwnersCustomersEmployeesRegulators -SEC -IRS -EPA
Decisions Supported
Performance evaluationsStock InvestmentsTax strategiesLabor relationsResource allocationsLending decisionsBorrowings
Decisions Supported
Performance evaluationsStock InvestmentsTax strategiesLabor relationsResource allocationsLending decisionsBorrowings
Financial Information Provided
Profitability
Financial Position
Cash Flows
Financial Information Provided
Profitability
Financial Position
Cash Flows
Information SystemInformation System
© The McGraw-Hill Companies, Inc., 2003McGraw-Hill/Irwin
Slide 1-5
Basic Functions of an Accounting System
Basic Functions of an Accounting System
Summarize and
communicate information to
decision makers.
Classify similar
transactions into useful
reports.
Interpret and record business
transactions.
© The McGraw-Hill Companies, Inc., 2003McGraw-Hill/Irwin
Slide 1-6
Objectives of External Financial Reporting
Objectives of External Financial Reporting
Cash Flow ProspectsInvestors Creditors
Return on Investment
Periodic dividends
Periodic interest
Return of Investment
Sale of ownership at a
future date
Repayment of loan at a
future date
The primary external users of financial information are investors and creditors.
The primary external users of financial information are investors and creditors.
© The McGraw-Hill Companies, Inc., 2003McGraw-Hill/Irwin
Slide 1-7
Information about economic resources, claims to resources, and changes in resources and claims.
Information useful in assessing amount, timing and uncertainty of
future cash flows.
Information useful in making investment and credit decisions.
(Specific)
(General)
Objectives of
Financial Reporting
© The McGraw-Hill Companies, Inc., 2003McGraw-Hill/Irwin
Slide 1-8
Financial Reporting andFinancial Statements
Financial Reporting andFinancial Statements
IncomeStatement
BalanceSheet
Statementof CashFlows
Other Information:•Industry•Competitors•Economy-wide
Other Information:•Industry•Competitors•Economy-wide
© The McGraw-Hill Companies, Inc., 2003McGraw-Hill/Irwin
Slide 1-9
Characteristics of Externally Reported Information
Characteristics of Externally Reported Information
A Means to an End
A Means to an End
Broader than Financial
Statements
Broader than Financial
Statements
Historical in Nature
Historical in Nature
Results from Inexact and Approximate Measures
Results from Inexact and Approximate Measures
Based on General Purpose
Assumption
Based on General Purpose
Assumption
Usefulness Enhanced via Explanation
Usefulness Enhanced via Explanation
© The McGraw-Hill Companies, Inc., 2003McGraw-Hill/Irwin
Slide 1-10
Integrity of Accounting InformationIntegrity of Accounting Information
Institutional FeaturesGenerally Accepted Accounting Principles (GAAP)Financial Accounting Standards BoardSecurities and Exchange CommissionInternal Control StructureAudits
© The McGraw-Hill Companies, Inc., 2003McGraw-Hill/Irwin
Slide 1-11
Integrity of Accounting InformationIntegrity of Accounting Information
Professional OrganizationsAmerican Institute of Certified Public Accountants Institute of Management AccountantsInstitute of Internal AuditorsAmerican Accounting Association
© The McGraw-Hill Companies, Inc., 2003McGraw-Hill/Irwin
Slide 1-12
Integrity of Accounting InformationIntegrity of Accounting Information
Competence, Judgment and Ethical BehaviorCertified Public Accountants (CPAs)Certificate in Management Accounting (CMA)Certificate in Internal Auditing (CIA)Code of Professional Conduct
CPA
