Accounting provides essential information about a company's financial situation and performance. It records, classifies, and summarizes business events in monetary terms according to accounting principles. Investors and other external actors rely on accounting information like profit, debt levels, and financial forecasts to make decisions. Accounting also helps internal managers and owners understand how the company is perceived externally and take business decisions by providing economic criteria. While accounting aims to provide a true and fair view, how information is presented and summarized can impact perception.

1. Carrefour Future Leaders
©Instituto Internacional San Telmo, 2014

2.  Accounting is the language companies speak.
EBITDA
Year-end
results
Depreciation
Assets
Cash flow
Debt
In the business world everyone in almost every department and at every level uses
certain specific concepts. We know broadly what they mean, but there is often much
more to them. Most importantly, we must remember that such indicators, concepts,
figures... and ultimately, the very progress of a company, are affected by our
business decisions.

3.  Investors attach great importance to
accounting information
Profit
Debt/ Savings
Financial forecast
Loss
Profit for the financial year and from previous financial years, financial ratios, debt level,
investment financing, profitability of business lines... These are all accounting aspects
that existing and potential investors care about.

4.  Accounting is a reflection of the company’s
situation
True and fair view?
Accounts help us gain information about a business. They can show a company’s
situation in different ways. It all depends on how information is presented, what is
emphasized, how the information is summarized, etc.
As partners, managers, or members of an organization it is important to know how our
company is presented to external actors and how external actors perceive it, and
whether or not a true and fair view of our company’s situation is given.

5.  Accounting helps take management and
business decisions
Decision-making
Criteria:
-Economic
-Strategic
-Commercial
Many factors, other than economic aspects, are considered when making a decision.
However, economic criteria rank high…

6. Why is accounting useful?
Accounting provides information about a business.
Accounting is a tool that RECORDS, CLASSIFIES and SUMMARIZES company events
measured as monetary units.
 However:
ONLY company EVENTS can be recorded. These events must be solidly and clearly
supported. Otherwise, it will not be possible to explain, record, classify, or
summarize them.
ONLY events that can be measured as monetary units can be recorded.

7. The “language” of accounting
 Accounting Principles
A special “language” is used in order to measure
business events as economic units: ACCOUNTING.
This language follows rules or grammar principles
known as Accounting Principles.
 Drawback: There are just a few principles and
these are not fixed rules. That is why they are
commonly referred to as “generally accepted”
principles. This might lead to misunderstandings if
some details are not known.
Click HERE to learn more about accounting regulations.
Business events that
can be measured
as $
ACCOUNTING
Principles
Assumptions
RECORDED (Log book)
CLASSIFIED (Ledger)
SUMMARIZED (Financial
Statements)

8. Users
Time Dimension
Information
Users
“OBJECTIVE”
reliable - unbiased
External
actors
“USEFUL”
relevant - timely
Internal
actors
External users: Suppliers, clients, banks, tax authorities…they all use a company’s
accounting information to make their decisions: selling or buying goods, granting
loans, assessing taxes. These users look for factual information, normally from past
years, because they need to rely on objective data.
Internal users: Shareholders, managers, employees, unions…they all look for guidance
and/or reassurance in a company’s accounting information in order to determine the
future outcome of the decisions they make today. To do that, they rely on information
about the company’s future, even if such information is less precise and more open to
debate.

9. Getting information from accounting
 From the accounting system come the financial statements. These statements
contain important information about the organization's operating results. This
information is important for effective management, and financial control. As a
manager, or any other person with financial responsibility, you have to be able to
interpret this information yourself.
 Financial statements contain important information about your company's operating
results and financial position. The relationship between certain items of financial data
can be used to identify areas where your firm excels and, more importantly, where
there are opportunities for improvement. Using, understanding, and interpreting these
statements will help you make much better business decisions