COPYRIGHT © 2008 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. 1 Chapter 1 Accounting Information: Users and Uses Albrecht, Stice, Stice, Swain

2 The Purpose of Accounting Accounting: –Accumulates financial data –Measures financial performance –Communicates financial information –Makes decision

3 What are the Functions of an Accounting? To analyze business events so to evaluate the financial health and performance of the business.

4 Who Uses Accounting Information? Internal users (Management Accounting): Management Examples of reports: –Budgets –Cost analyses –Performance reports

5 Who Uses Accounting Information? External users (Financial Accounting): InvestorsCompetitors LendersGovernment EmployeesPress CustomersSuppliers Examples of reports: –Balance sheet –Income statement –Statement of cash flows –Other regulatory reports

6 Rules of the Game External Reporting: General accepted accounting principles –Comparability –Reliability Internal Reporting: No rules

7 What are the Standard-Setting Organizations in the Malaysia? FRA Financial Reporting Act 1997 (FRA) - Establishes FRF. FRF Financial Reporting Foundation (FRF) - Comprises representation from all relevant parties in the satndard setting process, including preparers, users, regulators and accountancy profession. As an initial source of views for the MASB on proposed standards and pronouncements. MASB MASB (Malaysian Accounting Standards Board) - Aims to set Malaysian accounting standards, a conceptual framework and other forms of authoritative guidance.

8 Other Environmental Factors Ethics –Professional judgment –Enron Holds to what three key principles? - Integrity - Objectivity - Independence Technology –Vast amounts of information about transactions can be stored –Data can be compiled quickly and accurately Will computers replace the accountant?