Chapter 1 – Part 1. Define accounting vocabulary

Accounting and theBusiness

EnvironmentChapter 1 – Part 1

Learning Objective 1Define accounting vocabulary

1.

•Measures business activity

2.

•Processes data into reports

3.

•Communicates results to decision makers

3

Accounting: An Information System

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End product of accounting process Report on business in monetary terms

4

Financial Statements

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Learning Objective 2Define the users of financial information

6

Accounting — An Information Process

Accounting — An Information Process

Identificationof Users

7

EXTERNAL USERS

Financial Accounting

• investors• creditors• regulators• customers• competitors

owners managers employees

INTERNAL USERS

Managerial Accounting

Users of Accounting InformationUsers of Accounting Information

8

UserInformation

Needs

Accounting — An Information Process

Accounting — An Information Process

Identificationof Users

9

Identificationof Users

UserInformation

Needs

AccountingSystem

Accounting — An Information Process

Accounting — An Information Process

10

Identificationof Users

UserInformation

Needs

AccountingSystem

Economic Dataand Activities

Accounting — An Information Process

Accounting — An Information Process

11

Identificationof Users

UserInformation

Needs

AccountingSystem

Economic Dataand Activities

Reports

Accounting — An Information Process

Accounting — An Information Process

12

Identificationof Users

UserInformation

Needs

AccountingSystem

Reports

Economic Dataand Activities

UserDecisions

Accounting — An Information Process

Accounting — An Information Process

Individuals

Businesses Investors

CreditorsTaxing

Authorities

Decision Makers

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Financial Accounting

Provides information for external decision makers◦ Investors◦ Creditors◦ Taxing authorities

Managerial Accounting

Provides information for internal decision makers◦ Managers◦ Individual business

owners

Financial vs. Managerial Accounting

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Learning Objective 3Describe the accounting profession and the

organizations that govern it

Lucrative career with many opportunities Certified Public Accountants (CPAs)

◦ Pass qualifying exam◦ Meet education and/or experience requirements

The Accounting Profession

16

Public Accounting –CPA Firms

Private Accounting –

Business & Other Organizations

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17

EXTERNAL USERS

Financial Accounting

• investors• creditors• regulators• customers• competitors

Users of Accounting InformationUsers of Accounting Information

18

GAAP Generally Accepted Accounting Principles -

established rules, principles, and concepts Formulated by Financial Accounting

Standards Board (FASB)

•Financial Accounting Standards Board

•Private organization that makes accounting standards

FASB

19

Governing Organizations

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Learning Objective 4Identify the different types of business

organizations

Proprietorships Partnerships

CorporationsLimited Liability

Companies

Types of Business Organizations

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