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I-1 ACCOUNTING A BUSINESS PERSPECTIVE Seventh Edition ACCOUNTING A BUSINESS PERSPECTIVE Seventh Edition ROGER H. HERMANSON JAMES DON EDWARDS MICHAEL W.

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Presentation on theme: "I-1 ACCOUNTING A BUSINESS PERSPECTIVE Seventh Edition ACCOUNTING A BUSINESS PERSPECTIVE Seventh Edition ROGER H. HERMANSON JAMES DON EDWARDS MICHAEL W."— Presentation transcript:

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2 I-1 ACCOUNTING A BUSINESS PERSPECTIVE Seventh Edition ACCOUNTING A BUSINESS PERSPECTIVE Seventh Edition ROGER H. HERMANSON JAMES DON EDWARDS MICHAEL W. MAHER

3 I-2 Introduction Chapter The Accounting Environment Pages 1-11 Very Broad Overview

4 I-3Administration Bring book to class. How to take notes. Write in your book!!

5 I-4 Major Challenge What do you think is the biggest problem/challenge for most students taking introductory accounting? The Vocabulary! Accounting is often called “the language of business”. This is why all business students must take this course.

6 I-5 Text’s Definition of Accounting “The process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by the users of the information.” 2

7 I-6 The process of: Identifying, Measuring, Recording, Classifying, Summarizing, Reporting, and Interpreting... The process of: Identifying, Measuring, Recording, Classifying, Summarizing, Reporting, and Interpreting... Rice’s Definition of Accounting

8 I-7 Rice’s Definition of Accounting … What? Financial transactions … For whom? For interested users. Who are these interested users? … What? Financial transactions … For whom? For interested users. Who are these interested users?

9 I-8 Owners and prospective owners Customers (Why?) Customers (Why?) Employees and their unions (Why?) Employees and their unions (Why?) Creditors and lenders Government units General Public Interested Users (pg. 6-7)

10 I-9 Accounting vs. Bookkeeping l Bookkeeping Mechanical process May not know why... l Accounting Must know theory behind why... Should be able to apply theory to... l Bookkeeping Mechanical process May not know why... l Accounting Must know theory behind why... Should be able to apply theory to...

11 I-10 Classification of Accounting Jobs l Public Accounting l Private industry l Government l Education l Public Accounting l Private industry l Government l Education

12 I-11 Public Accounting l Public Accounting Firms offer professional accounting services to clients. l Generally, the public accountant’s goal is to become a Certified Public Accountant, or CPA. l The CPA certificate is generally considered to be required to be a “member of the profession” l Public Accounting Firms offer professional accounting services to clients. l Generally, the public accountant’s goal is to become a Certified Public Accountant, or CPA. l The CPA certificate is generally considered to be required to be a “member of the profession”

13 I-12 CPA Exam l National, two-day exam l Given twice a year May and November l Given at same time in all states l Has four parts l CPA is licensed by the state l National, two-day exam l Given twice a year May and November l Given at same time in all states l Has four parts l CPA is licensed by the state

14 I-13 Public Accounting Services  Audit Services Auditor’s Opinion or Report Auditor “attests” Only unique service  Tax Services Competition? Today’s emphasis?  Management Advisory/ Consulting Services Competition? Largest in world?

15 I-14 Big Six Five International CPA Firms (pg. 4)  Arthur Andersen & Co.  Deloitte & Touche  Ernst & Young  KPMG Peat Marwick  PricewaterhouseCoopers As of  Arthur Andersen & Co.  Deloitte & Touche  Ernst & Young  KPMG Peat Marwick  PricewaterhouseCoopers As of

16 I-15 Other Professional Accounting Certifications Management Accounting (CMA) Internal Auditing (CIA) See Department of Accounting Web site for important links. Management Accounting (CMA) Internal Auditing (CIA) See Department of Accounting Web site for important links.

17 I-16 Two Types of Accounting  Financial Accounting  Managerial Accounting  Financial Accounting  Managerial Accounting

18 I-17 Financial Accounting external Generating financial statements for external users of information about the company’s: u Results of Operations u Financial Position u Inflows and Outflows of Cash external Generating financial statements for external users of information about the company’s: u Results of Operations u Financial Position u Inflows and Outflows of Cash

19 I-18 Financial Accounting Income Statement Balance Sheet Statement of Cash Flows Financial Statements must be prepared in accordance with Generally Accepted Accounting Principles (GAAP)

20 I-19 Generally Accepted Accounting Principles (GAAP) l Common set of accounting rules followed by all public businesses. u Required by the Securities and Exchange Commission (SEC) l Often required by other external stakeholders, such as u Creditors, Lenders, Vendors, Investors l Auditors make sure they have been followed l Common set of accounting rules followed by all public businesses. u Required by the Securities and Exchange Commission (SEC) l Often required by other external stakeholders, such as u Creditors, Lenders, Vendors, Investors l Auditors make sure they have been followed

21 I-20 More on GAAP l Defined by the Financial Accounting Standards Board (FASB) l The FASB is the seven short fat guys (the Gurus) who hang out in Norwalk, CT

22 I-21 Managerial Accounting Generates information for internal use which is crucial for decision making Resource allocation decisions Financial decisions Production decisions Marketing decisions

23 I-22 Important Organizations (pp. 8 & 9) l Financial Accounting Standards Board (FASB) l American Institute of Certified Public Accountants (AICPA) l Governmental Accounting Standards Board (GASB) l Securities and Exchange Commission (SEC) l American Accounting Association (AAA) l Financial Executives Institute (FEI) l Institute of Management Accountants (IMA) l Financial Accounting Standards Board (FASB) l American Institute of Certified Public Accountants (AICPA) l Governmental Accounting Standards Board (GASB) l Securities and Exchange Commission (SEC) l American Accounting Association (AAA) l Financial Executives Institute (FEI) l Institute of Management Accountants (IMA)

24 I-23 Ethical Behavior of Accountants Obeying the profession’s Code of Ethics. Obeying the laws. Doing the “right” thing. Maintaining honesty and integrity. Ethical conduct includes:

25 I-24Miscellaneous How to Study the Chapters in this Text See pp. 10 & 11 How to Study the Chapters in this Text See pp. 10 & 11

26 I-25 END OF INTRO


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