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Accounting and theBusiness
EnvironmentChapter 1 – Part 1
Learning Objective 1Define accounting vocabulary
1.
•Measures business activity
2.
•Processes data into reports
3.
•Communicates results to decision makers
3
Accounting: An Information System
Copyright (c) 2009 Prentice Hall. All rights reserved.
End product of accounting process Report on business in monetary terms
4
Financial Statements
Copyright (c) 2009 Prentice Hall. All rights reserved.
Learning Objective 2Define the users of financial information
6
Accounting — An Information Process
Accounting — An Information Process
Identificationof Users
7
EXTERNAL USERS
Financial Accounting
• investors• creditors• regulators• customers• competitors
owners managers employees
INTERNAL USERS
Managerial Accounting
Users of Accounting InformationUsers of Accounting Information
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UserInformation
Needs
Accounting — An Information Process
Accounting — An Information Process
Identificationof Users
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Identificationof Users
UserInformation
Needs
AccountingSystem
Accounting — An Information Process
Accounting — An Information Process
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Identificationof Users
UserInformation
Needs
AccountingSystem
Economic Dataand Activities
Accounting — An Information Process
Accounting — An Information Process
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Identificationof Users
UserInformation
Needs
AccountingSystem
Economic Dataand Activities
Reports
Accounting — An Information Process
Accounting — An Information Process
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Identificationof Users
UserInformation
Needs
AccountingSystem
Reports
Economic Dataand Activities
UserDecisions
Accounting — An Information Process
Accounting — An Information Process
Individuals
Businesses Investors
CreditorsTaxing
Authorities
Decision Makers
13Copyright (c) 2009 Prentice Hall. All rights reserved.
Financial Accounting
Provides information for external decision makers◦ Investors◦ Creditors◦ Taxing authorities
Managerial Accounting
Provides information for internal decision makers◦ Managers◦ Individual business
owners
Financial vs. Managerial Accounting
14Copyright (c) 2009 Prentice Hall. All rights reserved.
Learning Objective 3Describe the accounting profession and the
organizations that govern it
Lucrative career with many opportunities Certified Public Accountants (CPAs)
◦ Pass qualifying exam◦ Meet education and/or experience requirements
The Accounting Profession
16
Public Accounting –CPA Firms
Private Accounting –
Business & Other Organizations
Copyright (c) 2009 Prentice Hall. All rights reserved.
17
EXTERNAL USERS
Financial Accounting
• investors• creditors• regulators• customers• competitors
Users of Accounting InformationUsers of Accounting Information
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GAAP Generally Accepted Accounting Principles -
established rules, principles, and concepts Formulated by Financial Accounting
Standards Board (FASB)
•Financial Accounting Standards Board
•Private organization that makes accounting standards
FASB
19
Governing Organizations
Copyright (c) 2009 Prentice Hall. All rights reserved.
Learning Objective 4Identify the different types of business
organizations
Proprietorships Partnerships
CorporationsLimited Liability
Companies
Types of Business Organizations
21Copyright (c) 2009 Prentice Hall. All rights reserved.
