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- 1. © 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
- 2. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
ACCOUNTING:
Information for Decision Making
Chapter
1
- 3. © 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.
- 4. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Types of Accounting InformationTypes of Accounting Information
Financial
Managerial
Tax
- 5. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Information
Users
Investors
Creditors
Managers
Owners
Customers
Employees
Regulatory
agencies
-SEC
-IRS
-EPA
Information
Users
Investors
Creditors
Managers
Owners
Customers
Employees
Regulatory
agencies
-SEC
-IRS
-EPA
Decision Support
CVP analysis
Performance
evaluation
Incremental
analysis
Budgeting
Capital
allocation
Earnings per
share
Ratio analysis
Decision Support
CVP analysis
Performance
evaluation
Incremental
analysis
Budgeting
Capital
allocation
Earnings per
share
Ratio analysis
Information SystemInformation System
Cost & Revenue
Determination
Job costing
Process costing
ABC
Sales
Assets &
Liabilities
Plant and
equipment
Loans & equity
Receivables,
payables & cash
Cash Flows
From operations
From financing
From investing
Cost & Revenue
Determination
Job costing
Process costing
ABC
Sales
Assets &
Liabilities
Plant and
equipment
Loans & equity
Receivables,
payables & cash
Cash Flows
From operations
From financing
From investing
- 6. © 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
- 7. © 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.
- 8. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Objectives of External Financial
Reporting
Objectives of External Financial
Reporting
Cash Flow Prospects
Investors 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.
- 9. © 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
- 10. © 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
- 11. © 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
- 12. © 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
- 13. © 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
- 14. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
T y p ic a l S im p le O r g a n iz a t io n C h a r t
P la n t
A c c o u n t a n t
P la n t
M a n a g e r
P la n t
A c c o u n t a n t
P la n t
M a n a g e r
B u s in e s s U n it
M a n a g e r
V .P . H u m a n
R e s o u r c e s
V .P . In f o r m a t io n
S e r v ic e s
C h ie f F in a n c ia l
O f f ic e r ( C F O )
C h ie f E x e c u t iv e
O f f ic e r
( C E O )
B o a r d o f
D ir e c t o r s
( O w n e r s )
- 15. © 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
- 16. © 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
- 17. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Integrity of Accounting InformationIntegrity of Accounting Information
Institutional Features
Generally Accepted Accounting Principles (GAAP)
Financial Accounting Standards Board
Securities and Exchange Commission
Internal Control Structure
Audits
- 18. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Integrity of Accounting InformationIntegrity of Accounting Information
Professional Organizations
American Institute of Certified Public Accountants
Institute of Management Accountants
Institute of Internal Auditors
American Accounting Association
- 19. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Integrity of Accounting InformationIntegrity of Accounting Information
Competence, Judgment and Ethical Behavior
Certified Public Accountants (CPAs)
Certificate in Management Accounting (CMA)
Certificate in Internal Auditing (CIA)
Code of Professional Conduct
CP
A
- 20. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
End of Chapter 1End of Chapter 1