Accounting Chapter 01- The Basis for Business Decision

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Accounting Chapter 01- The Basis for Business Decision

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  • Accounting Chapter 01- The Basis for Business Decision

    1. 1. A CCOUNTING eleventh edition Williams Haka Bettner Meigs
    2. 2. ACCOUNTING: The Basis for Business Decisions Chapter 1
    3. 3. The accounting process Decision makers Economic activities Accounting “links” decision makers with economic activities  and with the results of their decisions. Accounting information Actions (decisions)
    4. 4. Types of Accounting Information Financial Managerial Tax
    5. 5. Information System <ul><li>Information Users </li></ul><ul><li>Investors </li></ul><ul><li>Creditors </li></ul><ul><li>Managers </li></ul><ul><li>Owners </li></ul><ul><li>Customers </li></ul><ul><li>Employees </li></ul><ul><li>Regulators </li></ul><ul><li>-SEC </li></ul><ul><li>-IRS </li></ul><ul><li>-EPA </li></ul><ul><li>Decisions Supported </li></ul><ul><li>Performance evaluations </li></ul><ul><li>Stock Investments </li></ul><ul><li>Tax strategies </li></ul><ul><li>Labor relations </li></ul><ul><li>Resource allocations </li></ul><ul><li>Lending decisions </li></ul><ul><li>Borrowings </li></ul><ul><li>Financial Information Provided </li></ul><ul><li>Profitability </li></ul><ul><li>Financial Position </li></ul><ul><li>Cash Flows </li></ul>
    6. 6. Basic Functions of an Accounting System <ul><li>Interpret and record business transactions. </li></ul>Payment Car
    7. 7. Basic Functions of an Accounting System <ul><li>Interpret and record business transactions. </li></ul><ul><li>Summarize and communicate information to decision makers. </li></ul><ul><li>Classify similar transactions into useful reports. </li></ul>
    8. 8. Objectives of External Financial Reporting The primary external users of financial information are investors and creditors .
    9. 9. Objectives of Financial Reporting 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)
    10. 10. Financial Reporting and Financial Statements <ul><li>Other Information: </li></ul><ul><li>Industry </li></ul><ul><li>Competitors </li></ul><ul><li>Economy-wide </li></ul>Income Statement Balance Sheet Statement of Cash Flows
    11. 11. Characteristics of Externally Reported Information A Means to an End Broader than Financial Statements Historical in Nature Results from Inexact and Approximate Measures Based on General Purpose Assumption Usefulness Enhanced via Explanation
    12. 12. Users of Internal Accounting Information <ul><li>Board of Directors </li></ul><ul><li>Chief Executive Officer </li></ul><ul><li>Chief Financial Officer </li></ul><ul><li>Vice Presidents </li></ul><ul><li>Business Unit Managers </li></ul><ul><li>Plant Managers </li></ul><ul><li>Store Managers </li></ul><ul><li>Line Supervisors </li></ul>
    13. 14. Characteristics of Internal Accounting Information Timeliness Identify Decision-Making Authority Oriented Toward Future Measures of Efficiency and Effectiveness A Means to an End
    14. 15. End of Chapter 1

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