1. Accounting and the Business Environment
Chapter 1

2. A) ACCOUNTING... is an information system that...
measures business activities,
processes information, and...
communicates financial information to decision makers

3. € Accounting... is called the language of business.
is a means to an end. €

4. The Accounting Process
Accounting links decision makers with economic activities and with the results of their decisions.
Accounting
Information
Economic Activities
Reported Results of Actions (decisions)
Decision Makers
Actions (decisions)

5. Decision Makers Individuals Businesses Investors Creditors
Taxing Authorities

6. B) TYPES of ACCOUNTING INFORMATION & ITS USERS
Financial
Tax
Management

7. 1)Financial Accounting Information
Provides information about the financial resources, obligations, and activities of an enterprise that is intended for use primarily by external decision makers - investors and creditors in deciding where to place their scarce investment resources.

8. External Users of Accounting Information
Owners
Creditors
Potential investors
Labor unions
Governmental agencies
Suppliers
Customers
Trade associations
General public

9. Objectives of External Financial Reporting
The primary financial statements.
Balance Sheet
Income Statement
Statement of Cash Flows

10. 2)Management Accounting Information
Management (or managerial) accounting involves the development and interpretation of accounting information intended specifically to assist management in operating the business. A company’s managers and employees constantly need information to run and control daily business operations. Much management accounting information is financial in nature but is organized in a manner relating directly to the decision at hand.

11. Internal Users of Accounting Information
Board of directors
Chief executive officer (CEO)
Chief financial officer (CFO)
Vice presidents
Business unit managers
Plant managers
Store managers
Line supervisors

12. Objectives of Management Accounting Information
To help achieve goals and missions
To help evaluate and reward decision makers

13. 3) Tax Accounting Information
Tax accounting is a specialized field within accounting and focuses on the preparation of income tax returns and tax planning strategies.

14. C) ACCOUNTING SYSTEMS
An accounting system consists of the personnel, procedures, technology, and records used by an organization to develop accounting information and to communicate this information to decision makers.

15. Basic Functions of an Accounting System
Interpret and record business transactions.
Classify similar transactions into useful reports.
Summarize and communicate information to decision makers.

16. D) Professional Organizations
GAAP: Generally accepted accounting principles are the ground rules for financial reporting.
- Financial Accounting Standards Board (FASB)
- The Securities and Exchange Commission (SEC)
-American Institute of Certified Public Accountants
-Institute of Management Accountants
-Insstitute of Internal Auditors
-American Accounting Association
-Committee of Sponsoring Organizations of the Treadway Commission (COSO)
-Association of Charter Certified Accountants (ACCA)

17. E) Ethics Audit Sarbanes-Oxley Act
Examination of company’s financial situation
Performed by independent accountants
Sarbanes-Oxley Act
Criminal offense to falsify financial statements
Public Companies Accounting Oversight Board
Monitors work of accountants

18. F) Careers in Accounting
Public Accounting
Management Accounting
Governmental Accounting
Accounting Education
Bank Accounting

19. End of Chapter 1
End of chapter 2.