Accounting Information “Knowledge is Power” Sir Francis Bacon

Critical Thinking Careful and deliberate determination of whether to accept, reject or suspend judgment 5 broad characteristics –Analysis –Evaluation –Inference –Inductive reasoning –Deductive reasoning

Analysis Before we can say whether the argument or information makes “SENSE” or “NOT” –Have evaluated stated and unstated premises –Determine if premises provide sufficient support for its conclusion –Clearly understand and define concepts involved in the argumentation

Analysis Need to ask questions –What is the main argument? –What evidence or proof or support is offered? –What are the parts of this argument or information? –What is implied? –How do you know that these are the parts of the whole?

Analysis Is this a fair and balanced presentation? Is something left out? Intentionally or unintentionally??? What are the counterarguments? What are other theories or contentions?

Evaluation The purpose of evaluation is to help us figure out how believable the offered arguments are. Evaluation occurs all the time the real question is? How well do we evaluate?

Evaluation How would you prove or argue your position? –i.e. position on global warming Is the available information sufficient for making an informed judgment? –i.e. journal articles versus pop culture magazine articles What critique of the available information can you offer? How do you justify your position?

Inference Use whenever we draw conclusions based upon reason and evidence Apply inference skills (inductive and deductive) to many things –Beliefs –Opinions –Facts –Conjectures –Principles –assumptions

Inference What is the consequences of the available information? How does the information support the conclusion? Why did that person behave in that way?

Inductive Reasoning Specific types of information to general types of information Scientific method –Experimentation (method) –Statistics (tool) When you base “predictions” about how things will happen in the future on past experiences you are using inductive reasoning i.e. If majority of smokers have health problems in comparison to non-smokers then one can conclude that smoking is hazardous to your health

Deductive Reasoning From general types of information to specific types of information i.e. All men are mortal. George Bush is a man. Therefore, George Bush is mortal Algebra and geometry are exercises in deductive reasoning Playing games that require following rules is a form of deductive reasoning

The “Data” trend Two companies in past 6 months Each described themselves as “data driven” Each was very focused on the customer and sought to gain info from customer actions –Coldwater Creek –Harrah’s Entertainment

What does this got to do with Acctg? Accounting is all about.. –Gathering data –Sorting the data into categories (based upon strict rules) –Building reports from that categorized data –Analyzing the data –Evaluating the data –Making inferences from the data –Applying inductive and deductive reasoning skills to the information gleaned from the data –Which culminates into a decision

Going back to the beginning… Knowledge is power Accounting information is a form of knowledge Ergo…Accounting information is power