© The McGraw-Hill Companies, Inc., 2005 McGraw-Hill/Irwin 1-1 Financial & Managerial Accounting The Basis for Business Decisions THIRTEENTH EDITION Williams Haka Bettner
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© The McGraw-Hill Companies, Inc., 2005McGraw-Hill/Irwin
1-1
Financial & Managerial AccountingFinancial & Managerial Accounting
The Basis for Business Decisions
THIRTEENTH EDITION
Williams Haka Bettner
© The McGraw-Hill Companies, Inc., 2005McGraw-Hill/Irwin
1-2
ACCOUNTING:INFORMATION FOR DECISION MAKING
Chapter
1
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1-3
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.
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Types of Accounting InformationTypes of Accounting Information
Financial
Managerial
Tax
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1-5
Information Users
InvestorsCreditors ManagersOwnersCustomersEmployeesRegulators -SEC -IRS -EPA
Information Users
InvestorsCreditors ManagersOwnersCustomersEmployeesRegulators -SEC -IRS -EPA
Decisions Supported
Performance evaluationsStock investmentsTax strategiesLabor relationsResource allocationsLending decisionsBorrowing
Decisions Supported
Performance evaluationsStock investmentsTax strategiesLabor relationsResource allocationsLending decisionsBorrowing
Information SystemInformation System
Financial Information
ProvidedProfitability
Financial position
Cash flows
Financial Information
ProvidedProfitability
Financial position
Cash flows
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1-6
Basic Functions of an Accounting System
Basic Functions of an Accounting System
Interpret and record business
transactions.
Payment
Car
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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.
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1-8
External Users of Accounting Information
External Users of Accounting Information
•Owners
•Creditors
•Labor unions
•Governmental agencies
•Suppliers
•Customers
•Trade associations
•General public
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Provide information about economic resources, claims to resources, and changes in resources and claims.
Provide information useful in assessing amount, timing and
uncertainty of future cash flows.
Provide information useful in making investment and credit decisions.
(Specific)
(General)
Objectives of
Financial Reporting
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Objectives of External Financial Reporting
Objectives of External Financial Reporting
The primary financial
statements.
Income Statement
Balance Sheet
Statement of Cash Flows
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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
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Users of Internal Accounting Information
Users of Internal Accounting Information
Board of directorsChief executive officer (CEO)Chief financial officer (CFO)Vice presidentsBusiness unit managersPlant managersStore managersLine supervisors
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1-13Typical 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)
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Objectives of Management Accounting Information
Objectives of Management Accounting Information
To help achieve goals and missions
To help achieve goals and missions
To help evaluate and reward
decision makers
To help evaluate and reward
decision makers
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Characteristics of Management Accounting Information
Characteristics of Management Accounting Information
TimelinessTimeliness
Identify Decision
Maker
Identify Decision
Maker
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
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Integrity of Accounting InformationIntegrity of Accounting Information
Institutional FeaturesGenerally Accepted Accounting Principles (GAAP)Financial Accounting Standards BoardSecurities and Exchange CommissionInternal Control StructureAuditsLegislation
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Integrity of Accounting InformationIntegrity of Accounting Information
Professional OrganizationsAmerican Institute of Certified Public Accountants Institute of Management AccountantsInstitute of Internal AuditorsAmerican Accounting Association
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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
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Integrity of Accounting InformationIntegrity of Accounting Information
Careers in AccountingPublic AccountingManagement AccountingGovernmental AccountingAccounting Education
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1-20
End of Chapter 1End of Chapter 1
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