The Basis for Business Decisions
15th /e Williams, Haka, Bettner, Carcello
Financial Accounting
9th /e Meigs & Meigs
McGraw-Hill/Irwin
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Part I:Accounting & its Role
Accounting
Basic Financial Statements
1-3
Accounting
Profession Accountant Field?
No
“ Accounting is simply the means by which
we measure and describe the result of
economic activities”
Often Called
“ the Language of Business”
meigs & meigs
1-4
1-5
1-6
1-7
Purpose of Accounting
The basic purpose of accounting is to
provide decision makers with information
useful in making economic decisions.
1-8
Accounting from a User’s
Perspective
Individual need to understand:
The nature of economic activities that
accounting information describes
 The assumption and measurement techniques
involved in developing accounting information
 The accounting information that is most
relevant for various types of decisions

1-9
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)
1-10
Types of Accounting Information
Financial
Tax
Management
1-11
Basic Functions of an Accounting
System
 Interpret
and record
business
transactions.
 Classify
similar
transactions
into useful
reports.
 Summarize
and
communicate
information to
decision
makers.
1-12
Branches of Accounting
Financial
Accounting
Cost
Accounting
Managerial or
Management
Accounting
1-13
Areas of Accounting
1-14
Financial Accounting Information
Financial Accounting Provides information
about Financial resources, obligation, and
activities of an enterprise.
Financial
Position
Obligation
at point in
time
Result of
Operations
1-15
External Users of Accounting
Information
•Owners
•Creditors
•Potential investors
•Labor unions
•Governmental agencies
•Suppliers
•Customers
•Trade associations
•General public
1-16
Objectives of External Financial
Reporting
The primary financial
statements.
Balance
Sheet
Income
Statement
Statement
of Cash
Flows
1-17
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
1-18
Management Accounting Information
Create and use internal accounting
information not only for exclusive use
inside the organization but also to share
with external decision makers.
Example:
A producer may design an accounting
information system for suppliers detailing
its production plan.
1-19
Internal Users of Accounting
Information
•Owners
•Board of Director
•CEO & CFO
•Vice-presidents (information
services, human resources, ethics
and so forth)
•Business unit managers
•Plant managers
•Store managers
•Line supervisors
1-20
Objectives of Management
Accounting Information
Gather H&F
Information
from Both
sources
Objectives &
mission of
enterprise
Decision
Making
1-21
Characteristics of Management
Accounting Information
A means to an end
Identity of
Decision Maker
Importance of
Timelines
Oriented toward
the Future
Measures of Efficiency and
Effectiveness
1-22
Careers in Accounting
Public Accounting
Management Accounting
Governmental Accounting
Accounting Education
1-23
End of Chapter 1
1-24