Uk announces significant changes in entrepreneur visa policy
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© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Financial & Managerial Accounting
Financial & Managerial Accounting
The Basis for Business Decisions
TWELFTH EDITION
Williams Haka Bettner Meigs
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
ACCOUNTING:Information for Decision Making
Chapter
1
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Types of Accounting InformationTypes of Accounting Information
Financial
Managerial
Tax
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Information Users
InvestorsCreditors ManagersOwnersCustomersEmployeesRegulatory agencies -SEC -IRS -EPA
Information Users
InvestorsCreditors ManagersOwnersCustomersEmployeesRegulatory agencies -SEC -IRS -EPA
Decision SupportCVP analysis Performance evaluationIncremental analysisBudgetingCapital allocationEarnings per shareRatio analysis
Decision SupportCVP analysis Performance evaluationIncremental analysisBudgetingCapital allocationEarnings per shareRatio analysis
Information SystemInformation System
Cost & Revenue Determination
Job costingProcess costingABCSales
Assets & Liabilities
Plant and equipmentLoans & equityReceivables, payables & cash
Cash FlowsFrom operationsFrom financingFrom investing
Cost & Revenue Determination
Job costingProcess costingABCSales
Assets & Liabilities
Plant and equipmentLoans & equityReceivables, payables & cash
Cash FlowsFrom operationsFrom financingFrom investing
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Basic Functions of an Accounting System
Basic Functions of an Accounting System
Interpret and record business
transactions.
Payment
Car
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Basic Functions of an Accounting System
Basic Functions of an Accounting System
Summarize and
communicate information to
decision makers.
Classify similar
transactions into useful
reports.
Interpret and record business
transactions.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Objectives of External Financial Reporting
Objectives of External Financial Reporting
Cash Flow ProspectsInvestors Creditors
Return on Investment
Periodic dividends
Periodic interest
Return of Investment
Sale of ownership at a
future date
Repayment of loan at a
future date
The primary external users of financial information are investors and creditors.
The primary external users of financial information are investors and creditors.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Objectives of External Financial Reporting
Objectives of External Financial Reporting
The primary financial
statements.
Income Statement
Balance Sheet
Statement of Cash Flows
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Financial Reporting
Financial Reporting
Financial Statements
Financial Statements: A Lens to View Business
Financial Statements: A Lens to View Business
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Characteristics of Externally Reported Information
Characteristics of Externally Reported Information
A Means to an End
A Means to an End
Broader than Financial
Statements
Broader than Financial
Statements
Historical in Nature
Historical in Nature
Results from Inexact and Approximate Measures
Results from Inexact and Approximate Measures
Based on General Purpose
Assumption
Based on General Purpose
Assumption
Usefulness Enhanced via Explanation
Usefulness Enhanced via Explanation
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Internal Users of Accounting Information
Internal Users of Accounting Information
Board of Directors Chief Executive Officer Chief Financial Officer Vice Presidents Business Unit Managers Plant Managers Store Managers Line Supervisors
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Typical S im ple O rganization C hart
PlantAccountant
PlantManager
PlantAccountant
PlantManager
Business UnitManager
V.P. HumanResources
V.P. InformationServices
Chief FinancialOfficer (CFO)
Chief ExecutiveOfficer(CEO)
Board ofDirectors(Owners)
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Information about decision-making authority, for decision-making support, and
for evaluating and rewarding decision-making performance.
Information useful in assessing both the past performance and future
directions of the enterprise and information from external and internal sources.
Information useful to help the enterprise achieve its goal, objectives and mission.
Objectives of
Managerial Reporting
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Characteristics of Management Accounting Information
Characteristics of Management Accounting Information
TimelinessTimeliness
Identify Decision-Making
Authority
Identify Decision-Making
Authority
Oriented Toward Future
Oriented Toward Future
Measures of Efficiency and Effectiveness
Measures of Efficiency and Effectiveness
A Means to an End
A Means to an End
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Integrity of Accounting InformationIntegrity of Accounting Information
Institutional FeaturesGenerally Accepted Accounting Principles (GAAP)Financial Accounting Standards BoardSecurities and Exchange CommissionInternal Control StructureAudits
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Integrity of Accounting InformationIntegrity of Accounting Information
Professional OrganizationsAmerican Institute of Certified Public Accountants Institute of Management AccountantsInstitute of Internal AuditorsAmerican Accounting Association
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Integrity of Accounting InformationIntegrity of Accounting Information
Competence, Judgment and Ethical BehaviorCertified Public Accountants (CPAs)Certificate in Management Accounting (CMA)Certificate in Internal Auditing (CIA)Code of Professional Conduct
CPA
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
End of Chapter 1End of Chapter 1