...studied this chapter, you should be able to: 1. understand the nature of decisions and the decision-making process. 2. appreciate the wide range of economic decisions made in the marketplace. 3. explain the nature of accounting and its main functions. 4. identify the potential users of accounting information. 5. use information to make simple economic decisions. 6. understand the role of accounting information in the decision-making process. 7. understand the differences between accounting for management and accounting for external users. 8. understand how the accounting profession is organised in Australia. 9. identify the different areas of the economy in which accountants work. 10. understand the importance of ethics in business and accounting and how to recognise and handle ethical dilemmas as part of the decision-making process. 1 Chapter 1 STUDY TIPS FOR CHAPTER 1 1. This is an important chapter because it lays the foundation for all topics that will follow. 2. Make sure that you understand each new term as it is introduced. 3. Pay particular attention to the significance of accounting information for decisionmaking processes. 4. Identify the types of activities that are carried out by a professional accountant working in Australia. CHAPTER REVIEW 1. The nature of decisions and the decision-making process Decisions have to be made by all individuals every day. Decision making...
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...studied this chapter, you should be able to: 1. understand the nature of decisions and the decision-making process. 2. appreciate the wide range of economic decisions made in the marketplace. 3. explain the nature of accounting and its main functions. 4. identify the potential users of accounting information. 5. use information to make simple economic decisions. 6. understand the role of accounting information in the decision-making process. 7. understand the differences between accounting for management and accounting for external users. 8. understand how the accounting profession is organised in Australia. 9. identify the different areas of the economy in which accountants work. 10. understand the importance of ethics in business and accounting and how to recognise and handle ethical dilemmas as part of the decision-making process. 1 Chapter 1 STUDY TIPS FOR CHAPTER 1 1. This is an important chapter because it lays the foundation for all topics that will follow. 2. Make sure that you understand each new term as it is introduced. 3. Pay particular attention to the significance of accounting information for decisionmaking processes. 4. Identify the types of activities that are carried out by a professional accountant working in Australia. CHAPTER REVIEW 1. The nature of decisions and the decision-making process Decisions have to be made by all individuals every day. Decision making...
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...decisions by users of the information! Let's look at the key words in the above definition: - It suggests that accounting is about providing information to others. Accounting information is economic information - it relates to the financial or economic activities of the business or organisation. - Accounting information needs to be identified and measured. This is done by way of a "set of accounts", based on a system of accounting known as double-entry bookkeeping. The accounting system identifies and records "accounting transactions". - The "measurement" of accounting information is not a straight-forward process. it involves making judgements about the value of assets owned by a business or liabilities owed by a business. it is also about accurately measuring how much profit or loss has been made by a business in a particular period. As we will see, the measurement of accounting information often requires subjective judgement to come to a conclusion - The definition identifies the need for accounting information to be communicated. The way in which this communication is achieved may vary. There are several forms of accounting communication (e.g. annual report and accounts, management accounting reports) each of which serve a slightly different purpose. The communication need is about understanding whoneeds the accounting information, and what they need to know! Accounting information is communicated using "financial statements" There are two main purposes of financial statements: ...
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...WRITING A FINANCIAL STATEMENT ANALYSIS REPORT FOR A POTENTIAL USER The financial analyst should research, analyse and evaluate the company’s consolidated financial results. He/she should then compare such analysis and evaluation with that of a competitor or more working in the same industry group. The competitor should have the similar size (measured by total assets, sales turnover, number of employees, and/or capital employed) of the main company. The competitor should also have the same legal form as that of the main company (e.g. both companies should be Public Limited Company). It is essential that a financial analyst should write out a well-organised and structured financial statements analysis report in an appropriate format and style to an identified user of accounting information, using headings and sub-headings to indicate topics discussed. This report should include the key groups of ratios, and identify the key issues, explanations, and main findings obtained from the calculated ratios, horizontal and vertical analyses, and other sources of information. Then, the analyst should come to appropriate conclusions, implications, limitations, and recommendations. A suggested approach to write a good report is demonstrated below. I. Abstract * Report Objective; * Main Findings. II. Summary of the Basic Company Information Before looking at any of the different analysis techniques, it is good to spend some time doing a little bit of background research...
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...finally summarizing the transactions in a manner useful to the users of accounting information . Let’s now discuss these accounting processes one by one: 1. Identifying the transactions and events: This is the first step of accounting process. It identifies the transactions of financial character that is required to be recorded In the books of accounts. Transactions is transfer of money or goods or services from one person or account to another person or account. 2. Measuring: This denotes expressing the values of business transactions and events in terms of money 3. Recording: It deals with recording of identifiable and measurable transaction and events in a systematic manner in the books of original entry that are in accordance with principles of accountancy. 4. Classifying: It deals with periodic grouping of transactions of similar nature that appear in the books of original entry into appropriate heads by posting or transfer entries 5. Summarizing: It deals with summarizing or condensing transactions in a manner useful to the users. This function involves the preparation of financial statements such as income statement, balance sheet, statement of changes in financial position and cash flow statement 6. Analyzing: It deals with the establishment of relationship between the various items or group of items taken from income statement or balance sheet or both. Its purpose is to identify the financial strengths and weakness of the enterprise. The above six present...
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...Accounting Concepts and Business Structures Financial Accounting ACCT 537 Accountants use financial information to communicate how a business is performing. They present this information in financial reports. These reports are created following a common set of standards call General accepted accounting principles (GAAP). These standards and principles are established by the Financial Accounting Standard Board (FASB), the American Institute of certified Public Accountants (AICPA) and the Accounting Principle Board (APB). The SEC Is federal agency established to “help develop and standardize financial information presented to the stockholders” (Kieso 2007 pg. 6). It is responsible to enforce financial principles created. The FASB, the AICPA and the APB are institution formed by the private sector; the SEC believed that standards and principles should be created by the private sectors because it “has the appropriate resources and talent to achieve this daunting task” (Kieso 2007 pg. 6). The FASB is also working on establishing standards, “This standard identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements” (Kieso 2007 pg. 12). It is important that the hierarchy establish by the FASB is use because it gives accountants the ability to deal with any situations that have not been define by the standards and principles and it will also help identify issues that are widely found and need to...
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...above-proposed projects in a simple table format suitable for presentation to top management. Include the name for each project, identify how each one supports business strategies, assess the potential financial benefits and other benefits of each project, and provide your initial assessment of the value of each project. Project 1 | Recreation and Wellness Intranet Project | Project goal description | Allow employees to register for company-sponsored recreational programs, such as soccer, softball, bowling, jogging, walking and other sports.Allow employees to register for company-sponsored classes and programs to help them manage their weight, reduce stress, stop smoking, and manage other health related issues.Track data on employee involvement in these recreational and health-management programs.Offer incentive for people to join the programs and do well in them. | Business strategy compliance | This project should contribute to reducing internal costs of the company, as one of the strategic key goals.MYH, Inc. pays 20% more that industry average for employer health care preniums.This add-on to the existing Intranet will help employees improve their health and at the same time, lead to lower health insurance preniums. | Benifits | Net savings of at least $30/employee/year for full-time employees over the next for years.Total financial benefit for 20,000 full-time employees, with $30 saving per employee per year, for 4 years is $2,400,000.Health improve health our...
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...judgements and decisions by users of the information” (American Accounting Association 1966, page 1). This definition suggests that accounting is the provision of a business’s financial information to others in order to help those who control the organisation and make decisions – “accounting information should help identify and assess the financial consequences of certain decisions” (McLaney and Atrill 2005, page ). Managers need help making big decisions that will have a huge effect on all those involved in the business and as a result they need financial information to help aid and support their decisions. This definition also mentions the measuring of economic information, and it mustn’t go unsaid that the way in which information is measured, is not a simple process. It involves “making judgements about the value of assets owned by a business or liabilities owed by a business. It is also about accurately measuring how much profit or loss has been made by a business in a particular period” (Riley 2012, page 1). This can be a complicated process as how do you value something with no monetary worth? Furthermore, this definition highlights the fact that accounting entails the communication of economic information, however the information cannot be effectively communicated unless it is known who needs the information and what the information is for. There are many user groups of accounting, and each of their needs differ from one to the other. These user groups include: investors...
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...Accounting and Financial Statements Vern Rennier Upper Iowa University Accounting and Financial Statements In this essay I am going to explain and identify external users of accounting information and give detail on the main characteristics and how these characteristics and the conceptual framework develop the benefits of financial statements for external users. Financial accounting includes information distributed to external users that are not part of the enterprise, e.g. stockholders, creditors, customers and suppliers, although the information is also of interest to the company's officers and managers. External users have an interest in the businesses final accounts. They are individuals or groups from outside the business. (Cox, Fardon) They are also interested in the capability of a business to pay dividends. They may estimate the future cash flows using the past cash flow. The main external users consist of shareholders, creditors/suppliers, government, customers and lenders. (Elliot B and Elliot J) Shareholders are interested in dividends and profits. As they invest their own money in to the business they are really interested in how the business is running and how well it is doing. They are the owners of the business and they need to get information from those that manage the business on their behalf. They don’t have access to the same amount of detailed information as the managers do. The financial reports that are given to the shareholders are also...
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...What is financial accounting? Financial accounting is regarded as a professional in modern society. Most of the firms, especially the large ones, need it and have a particular department or team called accounting. In universities, financial accounting becomes a compulsory subject which BBA students must study. It is so well known that almost all people have heard of it. What actually is financial accounting? More specifically, what the main objectives or roles financial accounting has so that firms need it at a critical manner? Generally speaking, the purpose of accounting is to give relevant data or information that is necessary to make sound decision for the firms. And the main objective of financial accounting is to prepare financial statements such as statement of financial position, income statement, statement of owner’s equity and statement of cash flow. The preparation must be guided by generally accepted accounting principles, “GAAP” in short, of the physical location. The statements are then used to tell the external users the performance of the firm (Eisen, 2003). And the primary need for financial accounting, or sometimes called financial accountancy, is to minimize the principal-agent problems in organizations. This is to be done by evaluating and monitoring agents’ (manager) production and presenting the performance to people who interest in. In addition, financial accounting serves a lot of important objectives. It aims to understand the operation of the business...
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...information system that identifies, measures, records and communicates understandable, relevant, reliable, and comparable information about an organization’s economic activities. · Recordkeeping, or bookkeeping, is the recording of financial transactions, either manually or electronically, for the purpose of creating a reliable bank of data · Primary objective of accounting- to provide useful info for decision-making · Accounting info results from the accounting activities of identifying, measuring, recording, reporting, and analyzing economic transactions. 1. What is the major objective of accounting? · Accounting is an information and measurement system that identifies, measures, records, and communicates understandable, relevant, reliable, and comparable information to people that helps them in making better decisions. It helps people in business to identify and react to investment opportunities, and better assess opportunities, products, investments, and social[->0] and community responsibilities. 2. Distinguish between accounting and recordkeeping. · Recordkeeping is the recording of financial transactions and events, either manually or electronically. While recordkeeping is essential to data reliability, accounting is this and much more. Accounting includes identifying, measuring, recording, reporting, and analyzing economic events and transactions. It involves interpreting information, and designing information systems to provide useful reports that monitor and control...
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...‘bean counters’ or ‘number crunchers’ – Varied and interesting work in a variety of roles – More focus on analytical and communication skills • Non-accountants PowerPoint Presentation by Phil Johnson ©2015 John Wiley & Sons Australia Ltd LEARNING OBJECTIVES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Outline the dynamic environment in which accountants work Discuss the nature of decisions and the decision-making process Outline the range of economic decisions made in the marketplace Explain the nature of accounting and its main functions Identify the potential users of accounting information Apply information to make basic economic decisions Describe the role of accounting information in the decision-making process Compare accounting information for management and external users Summarise how the accounting profession is organised in Australia Identify the different areas of the economy in which accountants work Identify the importance of ethics in business and accounting and how to recognise and handle ethical dilemmas as part of the decision-making process. YOUR JOURNEY INTO ACCOUNTING • Accounting – Not ‘boring’ (mostly!) – Much more than just bookkeeping – Dynamic environment – The language of business • If you don’t have some understanding, you’re not in the conversation – Benefits of basic understanding – Engineers - product design (reduce costs/increase price) – Marketing – maximise sales – HR – major organisational cost THE...
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...process to identify measure and communicate economic information for the users of the information to come up with an informed judgement. (Association, n.d.). Standing the test of time, this definition defined the very purpose of accounting, which is to provide information to decision makers. As stated by this definition, accounting itself, is a process by which, financial reports are to be provided for the use of decision makers. Actually, Accounting is an information system wherein the key product of which is a set of financial reports. – The document that reports financial information about an entity to decision makers. Personal Planning, education, expenses, loans and payments, income taxes all use this information system that is accounting, (Conrado T. Valix, 2007) Having been defined as such, it is governed by rules and regulations, ensuring that it will provide a quality financial report enabling its decision makers to create intelligent decisions, these rules and regulations are defined Conceptual Framework – the professional and regulatory framework accounting that are concepts used in the preparation and presentation of financial reports. It covers the Concepts of Capital and Capital Maintenance, the Objective of Financial Statements, the Qualitative Characteristics of the Financial reports , (focusing on the manner of the report’s presentation and content) – or the qualities or attributes that make the reports useful to the users, and the Elements of the Financial Reports...
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...McDonalds, Fiscal Year 2012 Keith R. Jones Strayer University Accounting I Professor Togbenou November 25, 2013 1. Identify and explain the main sections of the annual report. The main sections of the McDonalds Corporations annual report consist of a 6 year Summary which provides the user with a brief overview of how the corporation has done over the previous 6 years which also includes the current year’s annual report. The report shows items that are on other parts of the annual report such as total revenues, net income, total assets and total shareholders’ equity. The 6 year Summary also shows items such results from company-operated and franchised restaurants giving a total under “system wide restaurants”. The 6 year Summary also shows franchised sales but notes that “franchised sales are not recorded as revenues by the company”. The information is provided to give an understanding of the corporations’ performance financially. The Management’s Discussion and Analysis of Financial Condition and Results of Operations provides the user with an overview as to a description of the business, strategic direction and financial performance for the U.S. and Europe. It also gives highlights from the year, and an outlook for the next or current year (2013) for the U.S. and Europe. The Consolidated Statement of Income provides total revenues through company operated restaurant sales and expenses which includes franchised restaurants-occupancy expenses and net...
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...analysing & communicating financial information Finance (Finance management) – concerned with the ways in which funds for business are raised & invested Relevance – information must have ability to influence decisions Reliability – free from serious error or bias-represent what is suppose to Comparability – identify changes in business over time, evaluate performance in relation to similar businesses Understandability –reports should be clear as possible and understood by those who information is aimed at Materiality – The requirement that material information should be disclosed to users in financial statements Management accounting – seeks to meet needs of managers Financial accounting – seeks to meet the accounting needs of all of the other users indentifies earlier in the chapter Chapter 1 Review questions 1.1 Accounting information is produced to help various users make informed judgements and decisions 1.2 Main users of accounting information for a university are: * Students * Skills funding Agency * Governing Body * Competitors – others colleges/universities * suppliers * lenders 1.3 In my opinion the saying that management accounting is the eyes and ears of management means that the management can’t see everything that is happening just by observation, the reports from management accounting provide overall information which may not be necessarily obvious to them. 1.4 Financial accounting statements are of...
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