accounting chapter 01

ACCOUNTING:

A CCOUNTING eleventh edition Williams Haka Bettner Meigs

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ACCOUNTING: The Basis for Business Decisions Chapter 1

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Accounting information The accounting process Decision makers Economic activities Actions (decisions) Accounting “links” decision makers with economic activities ¾ and with the results of their decisions.

Types of Accounting Information:

Types of Accounting Information Financial Managerial Tax

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Information Users Investors Creditors Managers Owners Customers Employees Regulators -SEC -IRS -EPA Decisions Supported Performance evaluations Stock Investments Tax strategies Labor relations Resource allocations Lending decisions Borrowings Financial Information Provided Profitability Financial Position Cash Flows Information System

Basic Functions of an Accounting System:

Basic Functions of an Accounting System Interpret and record business transactions. Payment Car

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.

Objectives of External Financial Reporting:

Objectives of External Financial Reporting The primary external users of financial information are investors and creditors .

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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

Financial Reporting and Financial Statements:

Financial Reporting and Financial Statements Income Statement Balance Sheet Statement of Cash Flows Other Information: Industry Competitors Economy-wide

Characteristics of Externally Reported Information:

Characteristics of Externally Reported Information A Means to an End Broader than Financial Statements Historical in Nature Results from Inexact and Approximate Measures Based on General Purpose Assumption Usefulness Enhanced via Explanation

Users of Internal Accounting Information:

Users of Internal Accounting Information Board of Directors Chief Executive Officer Chief Financial Officer Vice Presidents Business Unit Managers Plant Managers Store Managers Line Supervisors

Characteristics of Internal Accounting Information:

Characteristics of Internal Accounting Information Timeliness Identify Decision-Making Authority Oriented Toward Future Measures of Efficiency and Effectiveness A Means to an End

End of Chapter 1:

End of Chapter 1