1. COPYRIGHT © 2008 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. 1 Chapter 1 Accounting Information: Users and Uses Albrecht, Stice, Stice, Swain

2. 2 The Purpose of Accounting Accounting: –Accumulates financial data –Measures financial performance –Communicates financial information –Informed decisions can be made

3. 3 What are the Functions of an Accounting System? Analyze business events to determine if information should be captured by the accounting system. Day-to-day keeping track of things. Use summary information to evaluate the financial health and performance of the business.

4. 4 Who Uses Accounting Information? Internal users (Management Accounting): Management Examples of reports: –Budgets –Cost analyses –Performance reports

5. 5 Who Uses Accounting Information? External users (Financial Accounting): InvestorsCompetitors LendersGovernment EmployeesPress CustomersSuppliers Examples of reports: –Balance sheet –Income statement –Statement of cash flows –Other regulatory reports

6. 6 Rules of the Game External Reporting: General accepted accounting principles –Comparability –Reliability Internal Reporting: No rules

7. 7 Who Makes All the Rules? Generally accepted accounting principles Financial Accounting Standards Board –U.S. companies International Accounting Standards Board –Most international companies

8. 8 The Accounting Environment Accounting Regulators Accounting World Financial Accounting Standards Board (FASB) Public Company Accounting Oversight Board (PCAOB) Internal Revenue Service (IRS) American Institute of Certified Public Accountants (AICPA) Security and Exchange Commission (SEC) International Accounting Standards Board (IASB)

9. 9 Other Environmental Factors Ethics –Professional judgment –Enron Technology –Vast amounts of information about transactions can be stored –Data can be compiled quickly and accurately Will computers replace the accountant?

10. 10 Why Should I Study Accounting? Everyone makes financial decisions To make good financial decisions! Budgeting Investing Buying vs. leasing Financing