Accounting
Information for Decision Making
Chapter 1
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 © 2012 The McGraw-Hill Companies, Inc.
The
Accounting
Process
Economic
Activities
Actions
(decisions)
Accounting links
decision makers
with economic
activities  and
with the results of
their decisions.
Decision
Makers
Accounting
Information
Reported
Results of
Actions
(decisions)
1-2
Types of Accounting Information
Financial
Tax
Management
1-3
Accounting Systems
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.
1-4
Basic Functions of an Accounting
System
 Interpret
and record
business
transactions.
 Classify
similar
transactions
into useful
reports.
 Summarize
and
communicate
information to
decision
makers.
1-5
Components of Internal Control
Control
Environment
Risk
Assessment
Control
Activities
Information and
Communication
Monitoring
1-6
External Users of Accounting
Information
•Owners
•Creditors
•Potential investors
•Labor unions
•Governmental agencies
•Suppliers
•Customers
•Trade associations
•General public
1-7
Objectives of External Financial
Reporting
Provide specific 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.
Provide general information useful in
making investment and credit decisions.
1-8
Objectives of External Financial
Reporting
The primary financial
statements.
Balance
Sheet
Income
Statement
Statement
of Cash
Flows
1-9
Characteristics of Externally
Reported Information
A Means to an
End
Usefulness
Enhanced via
Explanation
Broader than
Financial
Statements
Based on GeneralPurpose
Assumption
Historical in
Nature
Results from Inexact and
Approximate Measures
1-10
Users of Internal Accounting
Information
 Board of directors
 Chief executive officer (CEO)
 Chief financial officer (CFO)
 Vice presidents
 Business unit managers
 Plant managers
 Store managers
 Line supervisors
1-11
Objectives of Management
Accounting Information
To help achieve
goals and
missions
To help evaluate
and reward
decision makers
1-12
Characteristics of Management
Accounting Information
Timeliness
A Means to an
End
Measures of
Efficiency and
Effectiveness
Identify
Decision Maker
Oriented Toward
Future
1-13
Competence, Judgment and
Ethical Behavior
Certified Public Accountant (CPA)
Certified Management Accountant (CMA)
Certified Internal Auditor (CIA)
Ethical behavior is the
cornerstone of the
accounting
profession.
1-14
Careers in Accounting
Public Accounting
Management Accounting
Governmental Accounting
Accounting Education
1-15
End of Chapter 1
1-16