This document discusses accounting information and its uses. It describes how accounting links decision makers with economic activities and results. There are three main types of accounting: financial, managerial, and tax. Accounting information supports decision making and is used by various internal and external users. Financial reporting aims to provide information to investors and creditors about resources, claims on resources, and cash flows. Managerial reporting aims to provide information for assessing performance and directing future actions. Integrity of accounting information is supported by generally accepted accounting principles, oversight bodies, professional organizations, and competency requirements for accountants.

1. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Financial accountingFinancial accounting
Saeed hussain
03339095696

2. © 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

3. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
ACCOUNTING:
Information for Decision Making
Chapter
1

4. © 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.

5. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Types of Accounting InformationTypes of Accounting Information
Financial
Managerial
Tax

6. © 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

7. © 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

8. © 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.

9. © 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.

10. © 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

11. © 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

12. © 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

13. © 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

14. © 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

15. © 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 )

16. © 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

17. © 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

18. © 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

19. © 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

20. © 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

21. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
End of Chapter 1End of Chapter 1