Financial & Managerial

Accounting
The Basis for Business Decisions
FOURTEENTH EDITION

Williams Haka Bettner Carcello

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 Chapter

1
Accounting
Information for Decision Making

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 Business
Business Disciplines
Disciplines

R&D

Design

Customer
Accounting
Service
Production

Distribution
Marketing
and Sales

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 Learning
Learning Objective
Objective

To discuss accounting
as the language of
business and the role of
accounting information
in making economic
decisions.

LO1
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 Accounting
Accounting
 Accounting is an information system which
process information about economic activities of
business entities for the use of decision makers.
 Economic entity is an economic organization that
acts independently.
 Business entity is an economic entity that sells
goods or provides services.
 Accounting is the language of business.
 The end-products of information processing are
financial statements.

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 The
The primary
primary financial
financial statements.
statements.

Balance Sheet

Income Statement

Statement of Cash Flows

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 The
accounting
process

Accounting
“links” decision
makers with Accounting
Economic
economic
activities information
activities ¾ and
with the results of
their decisions.

Actions
(decisions) Decision
makers
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 Accounting
Accounting Systems
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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 Basic
Basic Functions
Functions of
of an
an Accounting
Accounting
System
System

 Interpret  Classify
and record similar
business transaction
transaction s into  Summarize
s. useful and
reports. communicat
e information
to decision
makers.

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 Information
Information Users
Users
(Decision
(Decision Makers)
Makers)

Internal
InternalUsers External
Users External Users
Users

CEO
CEO •• Owners
 Owners
CFO
CFO •• Creditors
Creditors

Board
Boardofof •• Potential investors
directors Potential investors
directors •• Labor unions
Labor unions

Managers
Managers •• Governmental agencies
 Governmental agencies
Employees
Employees •• Suppliers
Suppliers
•• Customers
Customers
•• Trade associations
Trade associations
•• General public
General public

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 Types
Types of
of Accounting
Accounting Information
Information

Financial Cost

Managerial

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 FORMS OF BUSINESS
ORGANIZATION

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 Learning
Learning Objective
Objective

To describe the basic

characteristics of a sole
proprietorship.

LO1
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 Forms
Forms of
of Business
Business Organizations
Organizations
According
According to
to the
the Ownership
Ownership

Proprietorship
Proprietorship Partnership
Partnership Corporation
Corporation

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 Sole
Sole Proprietorships
Proprietorships

A sole proprietorship is a business

owned by one person. Proprietorships
are the most common form of business
organization because they are so easy
to start.

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 Characteristics
Characteristics of
of aa Sole
Sole Proprietorship
Proprietorship
The owner is personally
Ease of formation. liable for the debts of
the business.

Business assets actually Business pays no

belong to the proprietor. salary to the owner.

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 Learning
Learning Objective
Objective

To describe the basic

characteristics of a general
partnership and of
partnerships that limit
personal liability.

LO3
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 Partnerships
Partnerships

A partnership is an unincorporated business

owned by two or more partners. A partner may
be either an individual or a corporation.

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 General
General Partnerships
Partnerships
Each partner has rights and responsibilities
similar to those of a sole proprietor. Unless
restricted by agreement, each partner may
withdraw assets from the business at will.

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 Partnerships
Partnerships That
That Limit
Limit Personal
Personal Liability
Liability

Limited Partnerships
The partnership has a general partner who has the
right to make managerial decisions and has unlimited
liability for the obligations of the partnership. In
addition, the partnership has limited partners who are
basically passive investors.

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 Learning
Learning Objective
Objective

To describe the basic

characteristics of a
corporation.

LO4
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 Corporations
Corporations

A corporation is a legal entity, having an

existence separate and distinct from
that of its owners.
ers
n
Ow

Evidence of
Ownership

Stockholders Capital Stock

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 Corporations
Corporations

Corporations may be publicly owned or

closely held.

Publicly Owned Closely Held

Shares traded on Shares of stock not
IMKB publicly traded.

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 Forms
Forms of
of Business
Business Organizations
Organizations
According
According to
to the
the Activities
Activities They
They Perform
Perform
 Merchandising Companies
− Grossmarkets, garment stores,
bookstores...
 Manufacturing Companies
− Chemicals, food,clothing, automobile,
furniture, metal...
 Service Companies
− Healthcare/hospitals, tourism, banking,
education, consulting, legal practice
(Practice of law)...

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 Career
Career Opportunities
Opportunities in
in Accounting
Accounting
 Controller
(preparing financial statements, reports, budgeting, tax
return etc.; as a cost and management accountant)
 Internal Auditor
(responsible to oversee whether accounting principles and
policies are applied properly)
 Independent Auditor
(after graduation you may work in independent auditing
firms such as Earnst Young, PriceWaterhouseCoopers,
KPMG, Deloitte & Touch which provide auditing and
financial advisory services)

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 Career
Career Opportunities
Opportunities in
in Accounting
Accounting
 Certified Public Accountant
• Independent Accountant
• Certified Public Accountant (CPA)
• Sworn-in Certified Public Accountant (Sworn-in CPA)
 Careers in Public Sector
• Central Bank
• Capital Markets Board
• Istanbul Stock Exchance
• Ministry of Finance

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 Corporate
Corporate Organization
Organization Chart
Chart

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 Regulatory
Regulatory Bodies
Bodies (Institutions)
(Institutions)
 The accounting profession is regulated and
shaped by certain national and international
bodies.
 These organizations develop accounting
principles to be applied by business entities, and
monitor the accurate application of these
principles.

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 Regulatory
Regulatory Bodies
Bodies
 National
 Capital Markets Board (CMB)
 Ministry of Finance
 Turkish Accounting Standards Board (TASB)
 TURMOB (Union of Chambers of Certified Public
Accountants of Turkey)
 International
 International Federation of Accountants
 International Accounting Standards Board- International
Financial Reporting Standards (IFRS)
 Financial Accounting Standards Board (FASB)
 Federation of European Accountants (FEA)

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 End
End of
of Chapter
Chapter 11

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