Financial & Managerial

Accounting
The Basis for Business Decisions

TWELFTH EDITION

Williams Haka Bettner Meigs

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 Chapter

1 ACCOUNTING:
Information for Decision Making

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 The
accounting
process

Accounting
links decision
makers with Accounting
Economic
economic
activities information
activities and
with the results of
their decisions.

Actions
(decisions) Decision
makers
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 Types of Accounting Information

Financial Tax

Managerial

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 Information System

Cost & Revenue

Determination
Information Job costing Decision Support
Users Process costing CVP analysis
Investors ABC Performance
Creditors Sales evaluation
Managers Assets & Incremental
Owners Liabilities analysis
Customers Plant and Budgeting
Employees equipment Capital
Regulatory Loans & equity allocation
agencies Receivables, Earnings per
-SEC payables & cash share
-IRS Ratio analysis
Cash Flows
-EPA
From operations
From financing
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 Basic Functions of an Accounting
System
Interpret
and record
business
transactions.

Payment

Car

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

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 Objectives of External Financial
Reporting
The primary external users of financial information are
investors and creditors.

Cash Flow Prospects

Investors Creditors
Return on Periodic Periodic
Investment dividends interest
Sale of Repayment of
Return of ownership at a loan at a
Investment future date future date
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 (Specific)
Information about economic
Objectives
resources, claims to resources, and
changes in resources and claims. of
Financial
Reporting
Information useful in assessing
amount, timing and uncertainty of
future cash flows.

Information useful in making

investment and credit decisions.
(General)
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 Objectives of External Financial
Reporting

Balance Sheet

Income Statement
The primary
Statement of Cash Flows
financial
statements.

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 Financial Statements:
A Lens to View Business

Financial
Statements

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 Characteristics of Externally
Reported Information
A Means to
an End
Usefulness Broader than
Enhanced via Financial
Explanation Statements

Based on
Historical in
General Purpose
Nature
Assumption

Results from Inexact and

Approximate Measures
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 Internal Users of Accounting
Information

Board of Directors
Chief Executive Officer
Chief Financial Officer
Vice Presidents
Business Unit Managers
Plant Managers
Store Managers
Line Supervisors

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 Typical Simple Organization Chart

Board of
Directors
(Owners)

Chief Executive
Officer
(CEO)

Business Unit V.P. Human V.P. Information Chief Financial

Manager Resources Services Officer (CFO)

Plant Plant
Manager Manager

Plant Plant
Accountant Accountant
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 Information about decision-making
authority, for decision-making support, and Objectives
for evaluating and rewarding decision-making of
performance.
Managerial
Reporting
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.

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 Characteristics of Management
Accounting Information

Timeliness
Identify
A Means to Decision-
an End Making
Authority

Measures of Oriented
Efficiency and Toward
Effectiveness Future

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 Integrity of Accounting Information
Institutional Features
Generally Accepted Accounting Principles (GAAP)
Financial Accounting Standards Board
Securities and Exchange Commission
Internal Control Structure
Audits

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 Integrity of Accounting Information
Professional Organizations
American Institute of Certified Public Accountants
Institute of Management Accountants
Institute of Internal Auditors
American Accounting Association

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 Integrity of Accounting Information
Competence, Judgment and Ethical Behavior
Certified Public Accountants (CPAs)
Certificate in Management Accounting (CMA)
Certificate in Internal Auditing (CIA)
Code of Professional Conduct

CPA

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 End of Chapter 1

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