2008 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin Copyright 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
 Chapter 1
AccountingPresent and Past

PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA

McGraw-Hill/Irwin Copyright 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
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LO 1 What is Accounting?

Accounting is the process of:

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LO 2
Users and Uses of
Accounting Information
Decision/Informed Judgment
User Made
Management Planning, directing, and controlling
Investors/Shareholders Assessing amounts, timing, and
uncertainty of future cash returns on
their investment
Creditors/Suppliers Assessing probability of collection and
the risk of late (or non-) payment
Employees Planning for retirement and future job
prospects
Securities and Exchange Reviewing for compliance of all
Commission required information

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LO 3 Financial Accounting

Financial accounting generally refers to

the process that results in the preparation
and reporting of financial statements for
an entity.

Financial accounting is primarily

externally oriented and concerned with
the historical results of an entitys
performance.
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LO 3
Managerial Accounting/
Cost Accounting
Managerial accounting is concerned with the use
of economic and financial information to plan
and control many of the activities of the entity
and to support the management decision-making
process.

Cost accounting relates to the determination

and accumulation of product, process, or
service costs.

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LO 3
AuditingPublic
Accounting
Public accounting firms
and individual Certified
Public Accountants (CPAs)
provide auditing services
and issue an independent
auditors report.

An independent auditors report usually contains four brief

paragraphs and states whether the financial statements are
prepared in conformity with generally accepted accounting
principles. An auditors report can be unqualified (a clean
opinion) or qualified.
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LO 3 Internal Auditing
Internal auditors are
professional
accountants who
perform functions much
like those of an external
auditor. However,
internal auditors are
employed in industry
rather than public
accounting.

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LO 3
Governmental and Not-for-
Profit Accounting
Governmental units (e.g.,
municipal, state, and
federal agencies) and not-
for-profit entities (e.g.,
universities, hospitals, and
religious organizations)
require the same
accounting functions to be
performed as do other
accounting entities.

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LO 3 Income Tax Accounting

Tax practitioners often

develop specialties in
the taxation of
individuals,
partnerships,
corporations, trusts
and estates, or
international tax law
issues.

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LO 6
How Has Accounting
Developed?
Effective July, 2009, all FASB standards were
superseded by the FASB Accounting Standards
Codification (FASB Codification). Essentially, the FASB
Codification reorganized divergent sources of U.S.
GAAP in a more accessible and researchable format.
The FASB Codification now represents a single source
of U.S. GAAP.

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LO 6
Standards for Other Types
of Accounting
Cost Accounting
Managerial/Cost
Standards Board (CASB)
Accounting
for government contracts

Auditing/Public Auditing Standards

Accounting Board (part of AICPA)

Governmental
State and Local
Accounting Standards
Governments
Board (GASB)

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LO 6
International Accounting
Standards
The goal of the International Accounting
Standards Board (IASB) is to develop a single
set of high-quality, understandable, enforceable
and globally accepted financial reporting
standards based upon clearly articulated
principles.

The IASB has

issued 41 IASs and
13 IFRSs.
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LO 7
Ethics and the Accounting
Profession
Integrity Objectivity

Independence Competence

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LO 8
The Conceptual
Framework
In the mid-1970s, the Financial Accounting Standards
Board (FASB) began creating the Statements of
Financial Accounting Concepts (SFAC) in an effort to
define the underlying concepts of accounting principles
and financial reporting practices.

Statements of Financial
Accounting Concepts (SFACs)
describe concepts and
relationships that underlie financial
accounting standards.
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LO 9
Concepts Statement No. 8
Chapter 1: The Objective of General
Purpose Financial Statements

Individual firms or
External Users Historical cost
entities

Benefits exceed Notes and

Timely information
costs disclosures

Does not measure

Accrual accounting Evolving
value of the firm
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End of Chapter 1

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