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Chapter 1
Accounting in Business
IdentifiesIdentifies
RecordsRecords
CommunicatesCommunicatesRelevantRelevant
ReliableReliable
ComparableComparable
Importance of Accounting
AccountingAccountingis a
system that
information
that is
to help users make better decisions.
to help users make better decisions.
C1
Identifying Business Activities
Recording Business Activities
Communicating Business Activities
Accounting ActivitiesC 1
Users of Accounting Information
External Users
•Lenders
•Shareholders
•Governments
•Consumer Groups
•External Auditors
•Customers
Internal Users
•Managers
•Officers/Directors
•Internal Auditors
•Sales Staff
•Budget Officers
•Controllers
C 2
Users of Accounting Information
External Users
Financial accounting provides external users with financial
statements.
Internal Users
Managerial accounting provides information needs for internal
decision makers.
C 2
Opportunities in Accounting
FinancialFinancial
•Preparation•Analysis•Auditing•Regulatory•Consulting•Planning•Criminal investigation
•Preparation•Analysis•Auditing•Regulatory•Consulting•Planning•Criminal investigation
ManagerialManagerial
•General accounting •Cost accounting•Budgeting•Internal auditing•Consulting•Controller•Treasurer•Strategy
•General accounting •Cost accounting•Budgeting•Internal auditing•Consulting•Controller•Treasurer•Strategy
TaxationTaxation
•Preparation•Planning•Regulatory•Investigations•Consulting•Enforcement•Legal services•Estate plans
•Preparation•Planning•Regulatory•Investigations•Consulting•Enforcement•Legal services•Estate plans
Accounting-related
Accounting-related
•Lenders•Consultants•Analysts•Traders•Directors•Underwriters•Planners•Appraisers
•Lenders•Consultants•Analysts•Traders•Directors•Underwriters•Planners•Appraisers
•FBI investigators•Market researchers•Systems designers•Merger services•Business valuation•Human services•Litigation support•Entrepreneurs
•FBI investigators•Market researchers•Systems designers•Merger services•Business valuation•Human services•Litigation support•Entrepreneurs
C 3
Accounting Jobs by Area
Government, not-for-profit, & education
15%
Public accounting
25%
Private accounting
60%
C 3
Beliefs that distinguish right from
wrong
Accepted standards of good and bad
behavior
Ethics
Ethics—A Key ConceptC 4
Identify ethical concerns
Analyze options
Make ethical decision
Use personal ethics to
recognize ethical concern.
Consider all good and bad
consequences.
Choose best option after weighing all
consequences.
Guidelines for Ethical Decisions
C 4
Financial accounting practice is governed by concepts and rules known as generally accepted
accounting principles (GAAP).
Financial accounting practice is governed by concepts and rules known as generally accepted
accounting principles (GAAP).
Generally Accepted Accounting Principles
Relevant Information
Relevant Information
Affects the decision of its users.
Affects the decision of its users.
Reliable InformationReliable Information Is trusted by users.
Is trusted by users.
Comparable Information
Comparable Information
Is helpful in contrasting organizations.
Is helpful in contrasting organizations.
C 5
The Securities and Exchange Commission is the government group that establishes
reporting requirements for companies that issue stock to the public.
The Securities and Exchange Commission is the government group that establishes
reporting requirements for companies that issue stock to the public.
Setting Accounting Principles
Financial Accounting Standards Board is the private group that sets both broad and
specific principles.
Financial Accounting Standards Board is the private group that sets both broad and
specific principles.
C 5
Principles of Accounting
Now Future
Going-Concern PrincipleReflects assumption that the
business will continue operating instead of being closed or sold.
Cost PrincipleAccounting information is
based on actual cost.
Objectivity PrincipleAccounting information is supported by independent,
unbiased evidence.
C 5
Principles of Accounting
Revenue Recognition Principle1. Recognize revenue when it is
earned.2. Proceeds need not be in cash.3. Measure revenue by cash
received plus cash value of items received.
Monetary Unit PrincipleExpress transactions and events in
monetary, or money, units.
Business Entity PrincipleA business is accounted for
separately from other business entities, including its owner.
C 5
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