Financial Accounting

The Basis for Business Decisions

Lecture 2 – BBA2K23 By: Hassan Ali - Lecturer

Sindh University Campus, Thatta
Financial Accounting

Chapter 1
Accounting:
Information for Decision Making
Accounting: Information for Decision Making

Learning Objectives
 Financial Accounting Information
 Management Accounting Information
 Integrity of Accounting Information
 Careers in Accounting
 Ethics, Fraud & Corporate Governance
Accounting: Information for Decision Making

Financial Accounting Information

Financial Accounting provides information about the Financial Resources,
Obligations, and activities of an enterprise that is intended for use
primarily by external users.
External Users of Accounting Information
• Owners and Creditors
• Potential investors
• Labor unions
• Governmental agencies
• Suppliers & Customers
• General public
Accounting: Information for Decision Making

Financial Accounting Information

Objectives of External Financial Reporting

Provide specific information about economic resources, claims to

resources, and changes in resources and claims.

Financial Provide information useful in assessing amount, timing and

Statements uncertainty of future cash flows.

Provide general information useful in making investment and

credit decisions.
Accounting: Information for Decision Making

Financial Accounting Information

Characteristics of External Financial Reporting
A Means to an
End
Usefulness Enhanced Broader than
via Explanation Financial Statements

Based on General- Historical in

Purpose Assumption Nature
Results from Exact and
Approximate Measures
Accounting: Information for Decision Making

Management Accounting Information

Internal decision makers employed by the enterprise, often referred to as
management, create and use internal accounting information.

Internal Users of Accounting Reporting

• Board of directors
• Chief Executive Officer (CEO)
• Chief Financial Officer (CFO)
• Vice Presidents
• Business Unit Managers
• Plant Managers and Store Manager
• Line Supervisors
Accounting: Information for Decision Making

Management Accounting Information

Objectives of Management Accounting Information

To help achieve Goals

and Missions

To help Evaluate and

Reward Decision Makers
Accounting: Information for Decision Making

Management Accounting Information

Characteristics of External Financial Reporting
Timely Planning &
Controlling

A Means to an Identity of
End Decision Maker

Measures of Efficiency Oriented Toward

and Effectiveness Future
Accounting: Information for Decision Making

Integrity of Accounting Information

Competence, Judgment and Ethical Behavior
Certified Public Accountant (CPA), Certified Management
Accountant (CMA) & Certified Internal Auditor (CIA)
CPAs are licensed by the states, in much the same manner as
states license physicians and attorneys. The licensing
requirements vary somewhat from state to state, but in general,
an individual must be of good character, have completed 150
semester hours of college work with a major in accounting, pass
a rigorous examination, and have accounting experience.
Accounting: Information for Decision Making

Integrity of Accounting Information

Competence, Judgment and Ethical Behavior
Certified Public Accountant (CPA), Certified Management
Accountant (CMA) & Certified Internal Auditor (CIA)
While management accountants are not required to be licensed
as CPAs, they may voluntarily earn the Certified Management
Accountant or the Certified Internal Auditor as evidence of their
professional competence.
Accounting: Information for Decision Making

Integrity of Accounting Information

Competence, Judgment and Ethical Behavior
Ethical behavior is the Cornerstone of
the Accounting Profession.
Recently there have been many corporate
scandals involving individuals who acted
in an unethical, and often times illegal
way.
Accounting: Information for Decision Making

Careers in Accounting

Public Accounting
 Certified public accountants (CPAs) offer a
variety of accounting services to the
public including auditing financial
statements, income tax work, and
management advisory services.
Accounting: Information for Decision Making

Careers in Accounting
Management Accounting
 The management accountant works for
one enterprise and develops and
interprets accounting information
designed specifically to meet the various
needs of management.
Accounting: Information for Decision Making

Careers in Accounting
Governmental Accounting
 Governmental agencies use accounting
information in allocating their resources
and in controlling their operations.
 Its purpose is to track revenue, from
sources such as taxes, and expenditures on
public services and goods.
Accounting: Information for Decision Making

Careers in Accounting
What About Bookkeeping?
 Bookkeeping deals with identifying and
recording financial transactions only.
 Data provided by bookkeeping is not
sufficient for decision making.
 Bookkeeping does not show the financial
position of a business.
Accounting: Information for Decision Making

Careers in Accounting
What About Bookkeeping?
Bookkeeping is the clerical side of Accounting—
The recording of routine transactions and day-to-day record keeping.

Professional accountants are involved more with the interpretation

and use of accounting information than with its actual preparation.
Accounting: Information for Decision Making

Careers in Accounting
What if your are Accountant without Accounting Major?
Accounting is the language of business, and trying to run a business
without understanding accounting information is analogous to trying
to play sports without understanding the rules.
Accounting: Information for Decision Making

Ethics, Fraud & Corporate Governance

Financial Accounting Assignment I

 Which types of Un-Ethical and fraudulent activities
perpetrated by Enron, WorldCom, HealthSouth.
Accounting: Information for Decision Making

End of Lecture 2