Chapter 1

Accounting Information: Users and Uses

Albrecht, Stice, Stice, Swain

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The Purpose of Accounting

Accounting:
Accumulates financial data Measures financial performance Communicates financial information Informed decisions can be made

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.
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Who Uses Accounting Information?

Internal users (Management Accounting):
Management

Examples of reports:
Budgets Cost analyses Performance reports

Who Uses Accounting Information?

External users (Financial Accounting):
Investors Lenders Employees Customers Competitors Government Press Suppliers

Examples of reports:
Balance sheet Income statement Statement of cash flows Other regulatory reports
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Rules of the Game

External Reporting: General accepted accounting principles
Comparability Reliability

Internal Reporting: No rules

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Who Makes All the Rules?

Generally accepted accounting principles Financial Accounting Standards Board
U.S. companies

International Accounting Standards Board

Most international companies

The Accounting Environment

Accounting Regulators
Financial Accounting Standards Board (FASB) International Accounting Standards Board (IASB) Public Company Accounting Oversight Board (PCAOB)

Accounting World
Security and Exchange Commission (SEC) American Institute of Certified Public Accountants (AICPA) Internal Revenue Service (IRS)

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?

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Why Should I Study Accounting?

Everyone makes financial decisions Budgeting Investing

To make good financial decisions!

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