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The Basis for Business Decisions

Sixteenth Edition

Williams

Haka

Bettner

Carcello

PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA
McGraw-Hill/Irwin Copyright 2012 The McGraw-Hill Companies, Inc.

Accounting
Information for Decision Making
Chapter 1

PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA
McGraw-Hill/Irwin

The Accounting Process

Economic Activities

Accounting links decision makers with economic activities and with the results of their decisions.

Accounting Information

Actions (decisions)

Decision Makers

Reported Results of Actions (decisions)

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Types of Accounting Information

Financial

Tax

Management

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Accounting Systems
An accounting system consists of the personnel, procedures, technology, and records used by an organization to develop accounting information and to communicate this information to decision makers.

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Information System

Information Users Investors Creditors Managers Owners Customers Employees Regulators -SEC -IRS -FTC

Financial Information Provided Profitability Financial position Cash flows

Decisions Supported Performance evaluations Stock investments Tax strategies Labor relations Resource allocations Lending decisions Borrowing
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Basic Functions of an Accounting System

Interpret and record business transactions. Classify similar transactions into useful reports. Summarize and communicate information to decision makers.
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External Users of Accounting Information

Owners Creditors Potential investors Labor unions Governmental agencies Suppliers Customers Trade associations General public

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Objectives of External Financial Reporting

The primary financial statements.
Balance Sheet Statement of Cash Flows
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Income Statement

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Users of Internal Accounting Information

Board of directors Chief executive officer (CEO) Chief financial officer (CFO) Vice presidents Business unit managers Plant managers Store managers Line supervisors

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Competence, Judgment and Ethical Behavior

Certified Public Accountant (CPA) Certified Management Accountant (CMA) Certified Internal Auditor (CIA)

Ethical behavior is the cornerstone of the accounting profession.

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What About Bookkeeping?

Bookkeeping is the clerical side of accounting the recording of routine transactions and day-today record keeping.

Professional accountants are involved more with the interpretation and use of accounting information than with its actual preparation.
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Im Not An Accounting Major

Accounting is the language of business, and trying to run a business without understanding accounting information is analogous to trying to play sports without understanding the rules.

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End of Chapter 1

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