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Financial Accounting
THIRTEENTH EDITION
Williams
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Bettner
Carcello
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Chapter
1
Accounting
Information for Decision Making
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Learning Objective
To discuss accounting
as the language of
business and the role of
accounting information
in making economic
decisions.
LO1
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The
accounting
process
Economic
activities
Actions
(decisions)
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Accounting
“links” decision
makers with
economic
activities and
with the results of
their decisions.
Accounting
information
Decision
makers
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Types of Accounting Information
Financial
Tax
Managerial
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Learning Objective
To discuss the significance of
accounting systems in generating
reliable accounting information,
and understand the five
components of internal control
per COSO’s Internal Control—
Integrated Framework.
LO2
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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.
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Information System
Information
Users
Investors
Creditors
Managers
Owners
Customers
Employees
Regulators
-SEC
-IRS
-FTC
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Financial
Information
Provided
Profitability
Financial
position
Cash flows
Decisions
Supported
Performance
evaluations
Stock
investments
Tax strategies
Labor relations
Resource
allocations
Lending
decisions
Borrowing
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Basic Functions of an Accounting
System
Interpret
and record
business
transactions.
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 Classify
similar
transactions
into useful
reports.
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Summarize
and
communicate
information to
decision
makers.
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Components of Internal Control
Control
Environment
Risk
Assessment
Control
Activities
Information and
Communication
Monitoring
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Learning Objective
To explain the importance
of financial accounting
information for external
parties—primarily
investors and creditors—
in terms of the objectives
and the characteristics of
that information.
LO3
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External Users of Accounting
Information
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•Owners
•Creditors
•Potential investors
•Labor unions
•Governmental agencies
•Suppliers
•Customers
•Trade associations
•General public
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(Specific)
Provide 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.
Objectives
of
External
Financial
Reporting
Provide information useful in making
investment and credit decisions.
(General)
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Objectives of External Financial
Reporting
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Balance Sheet
Income Statement
Statement of Cash Flows
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The primary
financial
statements.
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Characteristics of Externally
Reported Information
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A Means to
an End
Usefulness
Enhanced via
Explanation
Broader than
Financial
Statements
Based on
General-Purpose
Assumption
Historical in
Nature
Results from Inexact and
Approximate Measures
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Learning Objective
To explain the importance
of financial accounting
information for internal
parties—primarily
management—in terms of
the objectives and the
characteristics of that
information.
LO4
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Users of Internal Accounting
Information
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 Board of directors
 Chief executive officer
(CEO)
 Chief financial officer (CFO)
 Vice presidents
 Business unit managers
 Plant managers
 Store managers
 Line supervisors
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Owners
Board of
Directors
Chief Executive
Officer
(CEO)
V.P
Ethics
Business
Unit
Managers
V.P.
Human
Resources
Plant
Managers
Plant
Managers
Plant
Accountants
Plant
Accountants
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Typical
Simple
Organization
Chart
V.P.
Information
Services
Chief
Financial
Officer (CFO)
Controller
Treasurer
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Objectives of Management
Accounting Information
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To help achieve
goals and missions
To help evaluate
and reward
decision makers
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Characteristics of Management
Accounting Information
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Timeliness
A Means to
an End
Identify
Decision
Maker
Measures of
Efficiency and
Effectiveness
Oriented
Toward
Future
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Learning Objective
To discuss elements of
the system of external
and internal financial
reporting that create
integrity in the reported
information.
LO5
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Integrity of Accounting Information
Institutional Features
Generally Accepted Accounting Principles (GAAP)
Financial Accounting Standards Board
International Accounting Standards Board
Securities and Exchange Commission
Public Company Accounting Oversight Board
Audits of Financial Statements
Legislation
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Learning Objective
To identify and discuss
several professional
organizations that play
important roles in
preparing and
communicating
accounting information.
LO6
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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
Committee of Sponsoring Organizations of the
Treadway Commission (COSO)
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Learning Objective
To discuss the
importance of personal
competence,
professional judgment,
and ethical behavior on
the part of accounting
professionals.
LO7
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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)
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Learning Objective
To discuss various
career opportunities in
accounting.
LO8
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Careers in Accounting
Public Accounting
Management Accounting
Governmental Accounting
Accounting Education
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End of Chapter 1
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