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© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 1-1 ACCOUNTING: Information for Decision Making Chapter 1.

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Presentation on theme: "© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 1-1 ACCOUNTING: Information for Decision Making Chapter 1."— Presentation transcript:

1 © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 1-1 ACCOUNTING: Information for Decision Making Chapter 1

2 © The McGraw-Hill Companies, Inc., 2003 McGraw-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.

3 © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 1-3 Types of Accounting Information Financial Managerial Tax

4 © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 1-4 Information Users  Investors  Creditors  Managers  Owners  Customers  Employees  Regulators -SEC -IRS -EPA 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 Decisions Supported  Performance evaluations  Stock Investments  Tax strategies  Labor relations  Resource allocations  Lending decisions  Borrowings Financial Information Provided  Profitability  Financial Position  Cash Flows Financial Information Provided  Profitability  Financial Position  Cash Flows Information System

5 © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 1-5 Basic Functions of an Accounting System  Summarize and communicate information to decision makers.  Classify similar transactions into useful reports.  Interpret and record business transactions.

6 © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 1-6 Objectives of External Financial Reporting The primary external users of financial information are investors and creditors.

7 © The McGraw-Hill Companies, Inc., 2003 McGraw-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

8 © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 1-8 Financial Reporting and Financial Statements Income Statement Balance Sheet Statement of Cash Flows Other Information: Industry Competitors Economy-wide Other Information: Industry Competitors Economy-wide

9 © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 1-9 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

10 © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 1-10 Integrity of Accounting Information Institutional Features  Generally Accepted Accounting Principles (GAAP)  Financial Accounting Standards Board  Securities and Exchange Commission  Internal Control Structure  Audits

11 © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 1-11 Integrity of Accounting Information Professional Organizations  American Institute of Certified Public Accountants  Institute of Management Accountants  Institute of Internal Auditors  American Accounting Association

12 © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 1-12 Integrity of Accounting Information Competence, Judgment and Ethical Behavior  Certified Public Accountants (CPAs)  Certificate in Management Accounting (CMA)  Certificate in Internal Auditing (CIA)  Code of Professional Conduct CPA


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