Chapter 1 Accounting in Business
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CHAPTER ONE: ACCOUNTING IN BUSINESS
Chapter Outline
I. Importance of Accounting—we live in the information age, where information, and its reliability, impacts the financial well-being of us all. A. Accounting Activities Accounting is an information and measurement system that identifies, records and communicates relevant, reliable, and comparable information about an organizations business activities. B. Users of Accounting Information 1. External Information Users—those not directly involved with running the company. Examples: shareholders (investors), lenders, customers, suppliers, regulators, lawyers, brokers, the press etc. a. Financial Accounting—area of accounting aimed at serving external users by providing them with generalpurpose financial statements. b. General-Purpose Financial Statement—statements that have broad range of purposes which external users rely on. 2. Internal Information Users—those directly involved in managing and operating an organization. a. Managerial Accounting—is the area of accounting that serves the decision-making needs of internal users. b. Internal Reports—not subject to same rules as external reports. They are designed with special needs of external users in mind. 3. Internal Controls—procedures set up to protect company property and equipment, ensure reliable accounting reports, promote efficiency, and encourage adherence to company policies. C. Opportunities in Accounting Four broad areas of opportunities are financial, managerial, taxation, and accounting related. 1. Private accounting offers the most opportunities. 2. Public accounting offers the next largest number of opportunities 3. Government (and not-for-profit) agencies, including business regulation and investigation of law violations also offer opportunities.
Notes
2
II.
Fundamentals of Accounting—accounting is guided by principles, standards, concepts, and assumptions. A. Ethics—a key concept. Ethics are beliefs that distinguish right from
CHAPTER ONE: ACCOUNTING IN BUSINESS
Chapter Outline
I. Importance of Accounting—we live in the information age, where information, and its reliability, impacts the financial well-being of us all. A. Accounting Activities Accounting is an information and measurement system that identifies, records and communicates relevant, reliable, and comparable information about an organizations business activities. B. Users of Accounting Information 1. External Information Users—those not directly involved with running the company. Examples: shareholders (investors), lenders, customers, suppliers, regulators, lawyers, brokers, the press etc. a. Financial Accounting—area of accounting aimed at serving external users by providing them with generalpurpose financial statements. b. General-Purpose Financial Statement—statements that have broad range of purposes which external users rely on. 2. Internal Information Users—those directly involved in managing and operating an organization. a. Managerial Accounting—is the area of accounting that serves the decision-making needs of internal users. b. Internal Reports—not subject to same rules as external reports. They are designed with special needs of external users in mind. 3. Internal Controls—procedures set up to protect company property and equipment, ensure reliable accounting reports, promote efficiency, and encourage adherence to company policies. C. Opportunities in Accounting Four broad areas of opportunities are financial, managerial, taxation, and accounting related. 1. Private accounting offers the most opportunities. 2. Public accounting offers the next largest number of opportunities 3. Government (and not-for-profit) agencies, including business regulation and investigation of law violations also offer opportunities.
Notes
2
II.
Fundamentals of Accounting—accounting is guided by principles, standards, concepts, and assumptions. A. Ethics—a key concept. Ethics are beliefs that distinguish right from