Role of Accounting

Demonstrate the role accounting and financial information plays for a business and for its stakeholders. I. THE ROLE OF ACCOUNTING INFORMATION A. Financial information is the HEARTBEAT OF COMPETITIVE BUSINESS MANAGEMENT. 1. You have to know something about accounting if you want to understand business. 2. You need to learn basic accounting terms and understand basics of how accounts are kept. 3. To run a business effectively you need to be able to read, understand, and analyze accounting reports and financial statements. 4. Accounting reports and financial statements are as revealing of the HEALTH OF A BUSINESS as pulse rate and blood pressure reports are in revealing the health of a person. 5. This chapter presents basic accounting information and explains the basic accounting statements and what they mean to business. B. WHAT IS ACCOUNTING? 1. ACCOUNTING is the recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties with the information they need to make good decisions. a. FINANCIAL TRANSACTIONS include i. buying and selling goods and services ii. acquiring insurance iii. paying employees iv. using supplies. b. An ACCOUNTING SYSTEM is the method used to record and summarize accounting data into reports. 2. PURPOSES OF ACCOUNTING: a. To give managers basic financial information so they may make better decisions. b. To report financial information to people outside the firm such as owners, creditors, suppliers, employees, investors, and the government. learning goal 2 Identify the different disciplines within the accounting profession. II. ACCOUNTING DISCIPLINES A. Accounting has been called the LANGUAGE OF BUSINESS. 1. Accounting is also the language used to report financial information about nonprofit organizations 2. Five key areas of the accounting profession are: