Accounting Information for Decision Making. Accounting. Financial & Managerial. accounting. The Basis for Business Decisions. Learning Objective LO1

Transcription

1 & Managerial Accounting The Basis for Business Decisions FOURTEENTH EDITION 1-1 Accounting for Decision Making Chapter Williams Haka Bettner Carcello 1-3 The accounting process 1-4 To discuss accounting as the language of business and the role of accounting information in making economic decisions. Economic activities Accounting links decision makers with economic activities and with the results of their decisions. Accounting information LO1 Actions (decisions) Decision makers

2 Types of Accounting Tax To discuss the significance of accounting systems in generating reliable e accounting information, o and understand the five components of internal control per COSO s Internal Control Integrated Framework. Managerial LO Accounting Systems System 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. Users Investors Creditors Managers Owners Customers Employees Regulators -SEC -IRS -FTC Provided Profitability position Cash flows Decisions Supported Performance evaluations Stock investments Tax strategies Labor relations Resource allocations Lending decisions Borrowing

3 Basic Functions of an Accounting System 1-9 Components of Internal Control 1-10 Interpret Classify and record similar business transactions transactions. into useful reports. Summarize and communicate information to decision makers. Control Environment Risk Assessment Control Activities and Communication Monitoring 1-11 External Users of Accounting 1-12 To explain the importance of financial accounting information for external parties primarily investors and creditors in terms of the objectives and the characteristics of that information. LO3 Owners Creditors Potential investors Labor unions Governmental agencies Suppliers Customers Trade associations General public

4 (Specific) Provide information about economic resources, claims to resources, and changes in resources and claims. Provide information useful in assessing amount, timing and uncertainty of future cash flows Objectives of External Reporting Objectives of External Reporting Balance Sheet Income Statement Statement of Cash Flows 1-14 The primary financial statements. Provide information useful in making investment and credit decisions. (General) Characteristics of Externally Reported Usefulness Enhanced via Explanation Based on General-Purpose Assumption A Means to an End Broader than Statements Historical in Nature To explain the importance of financial accounting information for internal parties primarily management in terms of the objectives and the characteristics of that information. Results from Inexact and Approximate Measures LO4

5 Users of Internal Accounting Board of directors Chief executive officer (CEO) Chief financial officer (CFO) Vice presidents Business unit managers Plant managers Store managers Line supervisors 1-17 V.P Ethics Plant Managers Business Unit Managers Plant Managers Owners Board of Directors Chief Executive Officer (CEO) V.P. Human Resources Typical Simple Organization Chart 1-18 V.P. Chief Services Officer (CFO) Controller Treasurer Plant Accountants Plant Accountants Objectives of Management Accounting 1-19 Characteristics of Management Accounting 1-20 To help achieve goals and missions A Means to an End Timeliness Identify Decision Maker To help evaluate and reward decision makers Measures of Efficiency and Effectiveness Oriented Toward Future

6 To discuss elements of the system of external and internal financial reporting that create integrity in the reported information. LO5 Integrity of Accounting Institutional Features Generally G Accepted Accounting Principles i (GAAP) Accounting Standards Board International Accounting Standards Board Securities S and Exchange Commission i Public Company Accounting Oversight Board Audits of Statements LegislationL i l To identify and discuss several professional organizations that play important roles in preparing p and communicating accounting information. Integrity of Accounting Professional Organizations American A i Institute t of Certified Public Accountants t Institute of Management Accountants Institute of Internal Auditors American A i Accounting Association Committee of Sponsoring Organizations of the Treadway Commission (COSO) LO6

7 To discuss the importance of personal competence, professional judgment, and ethical behavior on the part of accounting professionals. Integrity of Accounting Competence, Judgment and Ethical Behavior Certified C d Public Accountants t (CPAs) Certificate in Management Accounting (CMA) Certificate in Internal Auditing (CIA) LO Careers in Accounting To discuss various career opportunities in accounting. Public Accounting Management Accounting Governmental Accounting Accounting Education LO8

8 1-29 End of Chapter 1