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McGraw-Hill/Irwin

Copyright 2014 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 1
AccountingPresent and Past
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 2014 by The McGraw-Hill Companies, Inc. All rights reserved.

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What is Accounting?

LO 1

Accounting is the process of:

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LO 2

Users and Uses of


Accounting Information

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Financial Accounting

LO 3

Financial accounting generally refers to


the process that results in the
preparation and reporting of financial
statements for an entity.
Financial accounting is primarily
externally oriented and concerned with
the historical results of an entitys
performance.
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LO 3

Managerial Accounting/
Cost Accounting

Managerial accounting is concerned with the use


of economic and financial information to plan
and control many of the activities of the entity
and to support the management decision-making
process.
Cost accounting relates to the determination
and accumulation of product, process, or
service costs.
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LO 3

AuditingPublic
Accounting
Public accounting firms
and individual Certified
Public Accountants (CPAs)
provide auditing services
and issue an independent
auditors report.

An independent auditors report usually contains four brief


paragraphs and states whether the financial statements are
prepared in conformity with generally accepted accounting
principles. An auditors report can be unqualified (a clean
opinion) or qualified.
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LO 3

Internal Auditing
Internal auditors are
professional
accountants who
perform functions much
like those of an external
auditor. However,
internal auditors are
employed in industry
rather than public
accounting.

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LO 3

Governmental and Not-forProfit Accounting


Governmental units (e.g.,
municipal, state, and
federal agencies) and notfor-profit entities (e.g.,
universities, hospitals, and
religious organizations)
require the same
accounting functions to be
performed as do other
accounting entities.

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LO 3

Income Tax Accounting


Tax practitioners often
develop specialties in
the taxation of
individuals,
partnerships,
corporations, trusts
and estates, or
international tax law
issues.

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LO 6

How Has Accounting


Developed?

Effective July, 2009, all FASB standards were


superseded by the FASB Accounting Standards
Codification (FASB Codification). Essentially, the
FASB Codification reorganized divergent sources
of U.S. GAAP in a more accessible and
researchable format. The FASB Codification now
represents a single source of U.S. GAAP.

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LO 6

Standards for Other Types


of Accounting
Managerial/Cost
Accounting

Cost Accounting
Standards Board (CASB)
for government contracts

State and Local


Governments

Governmental
Accounting Standards
Board (GASB)

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LO 6

International Accounting
Standards
The goal of the International Accounting
Standards Board (IASB) is to develop a single
set of high-quality, understandable, enforceable
and globally accepted financial reporting
standards based upon clearly articulated
principles.
The IASB has
issued 41 IASs and
13 IFRSs.

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LO 7

Ethics and the Accounting


Profession
Integrity

Objectivity

Independence

Competence

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The Conceptual
Framework

LO 8

In the mid-1970s, the Financial Accounting Standards


Board (FASB) began creating the Statements of
Financial Accounting Concepts (SFAC) in an effort to
define the underlying concepts of accounting principles
and financial reporting practices.
Statements of Financial
Accounting Concepts (SFACs)
describe concepts and
relationships that underlie financial
accounting standards.
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LO 9

Concepts Statement No. 8

Chapter 1: The Objective of General


Purpose Financial Statements
Individual firms or
entities

External Users

Historical cost

Benefits exceed
costs

Timely
information

Notes and
disclosures

Accrual
accounting

Does not measure


value of the firm

Evolving

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End of Chapter 1

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