Financial _ Managerial Accounting

© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinFinancial & Managerial AccountingThe Basis for Business DecisionsTWELFTH EDITIONWilliams Haka Bettner Meigs© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinACCOUNTING:Information for Decision MakingChapter1© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinAccountinginformationThe accounting processDecision makersEconomic activitiesActions (decisions)Accounting “links” decision makers with economic activities and with the results of their decisions.© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinTypes of Accounting InformationFinancialManagerialTax© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinInformation UsersInvestorsCreditors ManagersOwnersCustomersEmployeesRegulatoryagencies-SEC-IRS-EPADecision SupportCVP analysis PerformanceevaluationIncremental analysisBudgetingCapital allocationEarnings per shareRatio analysisInformation SystemCost & Revenue DeterminationJob costingProcess costingABCSalesAssets & LiabilitiesPlant andequipmentLoans & equityReceivables,payables & cashCash FlowsFrom operationsFrom financingFrom investing© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinBasic Functions of an Accounting SystemInterpret and record business transactions.PaymentCar© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinBasic Functions of an Accounting SystemSummarize and communicate information to decision makers.Classify similar transactions into useful reports.Interpret and record business transactions.© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinObjectives of External Financial ReportingCash Flow ProspectsInvestorsCreditorsReturn on InvestmentPeriodic dividendsPeriodic interestReturn of InvestmentSale of ownership at a future dateRepayment of loan at a future dateThe primary external users of financial information are investorsand creditors.© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinInformation about economic resources, claims to resources, and changes in resources and claims.Information useful in assessing amount, timing and uncertainty of future cash flows.Information useful in making investment and credit decisions.(Specific)(General)Objectives of Financial Reporting© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinObjectives of External Financial ReportingThe primary financial statements.Income StatementBalance SheetStatement of Cash Flows© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinFinancial ReportingFinancial ReportingFinancial StatementsFinancial Statements: A Lens to View Business© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinCharacteristics of Externally Reported InformationA Means to an EndBroader than Financial StatementsHistorical in NatureResults from Inexact and Approximate MeasuresBased on General Purpose AssumptionUsefulness Enhanced via Explanation© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinInternal Users of Accounting InformationBoard of DirectorsChief Executive Officer Chief Financial OfficerVice PresidentsBusiness Unit ManagersPlant ManagersStore ManagersLine Supervisors© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinTypical Simple Organization ChartPlantAccountantPlantManagerPlantAccountantPlantManagerBusiness UnitManagerV.P. HumanResourcesV.P. InformationServicesChief FinancialOfficer (CFO)Chief ExecutiveOfficer(CEO)Board ofDirectors(Owners)© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinInformation about decision-making authority, for decision-making support, and for evaluating and rewarding decision-making performance.Information useful in assessing both the past performance and future directions of the enterprise and information from external and internal sources.Information useful to help the enterprise achieve its goal, objectives and mission.Objectives of Managerial Reporting© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinCharacteristics of Management Accounting InformationTimelinessIdentify Decision-Making AuthorityOriented Toward FutureMeasures of Efficiency and EffectivenessA Means to an End© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinIntegrity of Accounting InformationInstitutional FeaturesGenerally Accepted Accounting Principles (GAAP)Financial Accounting Standards BoardSecurities and Exchange CommissionInternal Control StructureAudits© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinIntegrity of Accounting InformationProfessional OrganizationsAmerican Institute of Certified Public Accountants Institute of Management AccountantsInstitute of Internal AuditorsAmerican Accounting Association© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinIntegrity of Accounting InformationCompetence, Judgment and Ethical BehaviorCertified Public Accountants (CPAs)Certificate in Management Accounting (CMA)Certificate in Internal Auditing (CIA)Code of Professional ConductCPA© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/IrwinEnd of Chapter 1