Chapter 01 Accounting Information and Decision Making McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

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Presentation transcript:

Chapter 01 Accounting Information and Decision Making McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Part A Accounting as a Measurement/Communication Process 1-2

LO1 Basic Understanding of Accounting Accounting – The language of business Make Decisions About Communicate information t o: Activities Measured b y: PeopleCompanies Accountants 1-3

LO2 Business Activities to Measure Financing activities Investing activities Operating activities Business Activities Involves funding from external sources Involves purchase and sale of long- term resources Involves transactions in primary operations of business 1-4

LO3 Communicating Through Financial Statements Financial statements are periodic reports published by the company for the purpose of providing information to external users. Statement of Stockholders’ EquityIncome Statement Statement of Cash FlowsBalance Sheet 1-5

Income Statement Financial statement that reports the company’s revenues and expenses over an interval of time Shows whether the company was able to generate enough revenue to cover the expenses of running the business If Revenues > Expenses then Net Income If Revenues < Expenses then Net Loss 1-6

Statement of Stockholders’ Equity Financial statement that summarizes the changes in stockholders’ equity over an interval of time. 1-7

Balance Sheet Financial statement that presents the financial position of the company on a particular date Summarized by the basic accounting equation: Assets = Liabilities + Stockholders’ Equity 1-8

Statement of Cash Flows Financial statement that measures activities involving cash receipts and cash payments over an interval of time. Can be classified into three categories Operating cash flows Investing cash flows Financing cash flows 1-9

Part B Financial Accounting Information 1-10

LO4 Importance of Financial Accounting Option A Option B Financial Accounting Information Investors and creditors Investment Choices ? Financial accounting information is essential to making good business decisions 1-11

LO5 Rules of Financial Accounting Investors & Creditors Financial Accounting Information Generally Accepted Accounting Principles (GAAP) make their decisions based on Should be based on formal standards 1-12

Part C Careers in Accounting 1-13

LO6 Careers in Accounting Financial accountants Managerial accountants Budget analysts Internal auditors Tax preparers Payroll managers Auditors Tax preparers/planners Business consultants Traditional roles: Your employerCorporations Governments Nonprofit organizations Individuals Clients: (Big 4 and Non-Big 4) Private AccountingPublic Accounting Financial accountants Managerial accountants Budget analysts Internal auditors Tax preparers Payroll managers Auditors Tax preparers/planners Business consultants Traditional roles: Your employerCorporations Governments Nonprofit organizations Individuals Clients: (Big 4 and Non-Big 4) Private AccountingPublic Accounting 1-14

LO7 Conceptual Framework Appendix 1-15

Qualitative Characteristics 1-16

End of Chapter