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Lecture Financial Accounting (15e): Chapter 1

After completing this chapter you should be able to: Explain the purpose and importance of accounting; identify users and uses of, and opportunities in, accounting; explain why ethics are crucial to accounting; explain generally accepted accounting principles and define and apply several accounting principles. | Accounting Information for Decision Making Chapter 1 Chapter 1: Accounting—Information for Decision Making 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. Reported Results of Actions (decisions) Not all transactions entered into by a business entity are capable of being recorded. The first task for accountants is to identify those economic events that can be recorded in the accounting system. Once the necessary economic information has been accumulated in a readable format, decision makers use this information to improve the decision-making process. Decisions made will impact future economic activities which will then find their way into the data accumulation process. Types of Accounting Information Financial Management Tax Broadly speaking, accounting information can be placed into one of three categories: financial, management, and tax. Financial accounting refers to information describing the financial resources, obligations, and activities of an economic entity (either an organization or an individual). Financial accounting information is designed primarily to assist investors and creditors in deciding where to place their scarce investment resources. Management (or managerial) accounting involves the development and interpretation of accounting information intended specifically to assist management in operating the business. A company’s managers and employees constantly need information to run and control daily business operations. Much management accounting information is financial in nature but is organized in a manner relating directly to the decision at hand. Tax accounting is a specialized field within accounting and focuses on the preparation of income tax returns and tax planning strategies. Accounting Systems An accounting system consists of the personnel, procedures, technology, and . | Accounting Information for Decision Making Chapter 1 Chapter 1: Accounting—Information for Decision Making 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. Reported Results of Actions (decisions) Not all transactions entered into by a business entity are capable of being recorded. The first task for accountants is to identify those economic events that can be recorded in the accounting system. Once the necessary economic information has been accumulated in a readable format, decision makers use this information to improve the decision-making process. Decisions made will impact future economic activities which will then find their way into the data accumulation process. Types of Accounting Information Financial Management Tax Broadly speaking, accounting information can be placed into one of three categories: financial, .