Prepared by: Jan Hájek Accounting Lecture no 1

WHAT IS ACCOUNTING System based on collecting and analyzing financial information System providing information about assets, liabilities and equity in accounting entity

Gerald Trenholm 7 MacCauly Drive Fredericton NB Identification Select economic events (transactions ) Recording Record, classify, and summarize Account ing Reports SOFTBYTE Annual Report Prepare accounting reports Analyse and interpret for users Communication THE ACCOUNTING PROCESS 2000

USERS OF ACCOUNTING DATAS Business Competitors Lenders Managers Suppliers Investment analysts Community representatives Government Employees and their representatives Customers Owners

QUESTIONS ASKED BY INTERNAL USERS Can we afford to give employees pay raises this year? Is cash sufficient to pay bills? What is the cost of manufacturing each unit of product? Which product line is the most profitable?

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

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

External Users of Accounting Information Suppliers Investors Clients Tax authorities

QUESTIONS ASKED BY EXTERNAL USERS Is the company earning satisfactory income? How does the company compare in size and profitability with its competitors? Will the company be able to pay its debts as they come due? What do we do if they catch us?

Financial recording casual transaction on credit or debit side of the accounts Managerial budgeting, calculations, BEP analysis Tax for calculation of tax liability deductible vs. undeductible costs TYPES OF ACCOUNTING

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

Information about decision-making authority, for decision-making support, and for evaluating and rewarding decision-making performance. Information useful in assessing both the past performance and future directions of the enterprise and information from external and internal sources. Information useful to help the enterprise achieve its goal, objectives and mission. Objectives of Managerial Reporting

Nature of the reports produced Level of detail The existence of regulations Reporting interval Time orientation Range and quality of information The major differences concern:

Accounting Includes bookkeeping Also includes much more Bookkeeping Involves only the recording of economic events Is just one part of accounting BOOKKEEPING vs. ACCOUNTING

THE ACCOUNTING PROFESSION Public accountants offer their expertise to the general public through the services they perform. (CPA) Private accountants are employees of individual companies and are involved in a number of activities, including cost and tax accounting, systems, and internal auditing. Not-for-profit accounting includes reporting and control for government units, foundations, hospitals, labour unions, colleges/universities, and charities.

ETHICS To Solve Ethical Dilemma 1. Recognize situation and ethical issues involved 2. Identify and analyse elements 3. Identify alternatives and weigh effects on stakeholders Ethics Standards of conduct

US MAJOR ACCOUNTING BODIES American Institute of Certified Public Accountants Financial Accounting Standards Board Government Accounting Standards Board Securities and Exchange Commission

CZ MAJOR ACCOUNTING BODIES Komora auditorů Národní účetní rada

REGULATION OF ACCOUNTING US US GAAP CZ CZ GAAP /CAS (Czech accounting stadards) Act no. 563/1991 on accounting Decree no. 500/2002 EU IFRS 78/660/EHS – reporting and consitency of information in accounting statemes of international corporation 83/349/EHS – consolidation 79/1072/EHS – obligation on audit

BUSINESS ENTERPRISES Partnership Corporation Sole proprietorship

BUSINESS ENTERPRISES A business owned by one person is generally a proprietorship (owner’s equity). A business owned by two or more persons associated as partners is a partnership (partners’ equity). A business organized as a separate legal entity under corporation law and having ownership divided into transferable shares is called a corporation (shareholders’ equity). Mixed form