Accounting

Information for Decision Making

Chapter 1

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 © 2012 The McGraw-Hill Companies, Inc.
 The
Accounting
Process

Accounting links
decision makers
Economic
with economic Accounting
Activities activities  and Information
with the results of
their decisions.

Reported
Results of
Decision
Actions Actions
(decisions)
Makers (decisions)
1-2
Types of Accounting Information

Financial Tax

Management

1-3
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.

1-4
 Basic Functions of an
Accounting System
 Interpret  Classify
and record similar
business transactions
transactions. into useful
reports.
 Summarize
and
communicate
information to
decision
makers.
1-5
Components of Internal Control
Control
Environment

Risk
Assessment

Control
Activities

Information and
Communication

Monitoring

1-6
 External Users of Accounting
Information
•Owners
•Creditors
•Potential investors
•Labor unions
•Governmental agencies
•Suppliers
•Customers
•Trade associations
•General public

1-7
Objectives of External Financial
Reporting
Provide specific 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.

Provide general information useful in

making investment and credit decisions.
1-8
Objectives of External Financial
Reporting
The primary financial statements.

Balance Income
Sheet Statement

Statement
of Cash
Flows
1-9
 Characteristics of Externally
Reported Information
AAMeans
Meanstotoan
an
End
End
Usefulness
Usefulness Broader
Broaderthan
than
Enhanced
Enhancedviavia Financial
Financial
Explanation
Explanation Statements
Statements

Based
Basedon
onGeneral-
General-
Purpose Historical
Historicalin
in
Purpose Nature
Assumption
Assumption Nature

Results
Resultsfrom
fromInexact
Inexactand
and
Approximate
ApproximateMeasures
Measures
1-10
Users of Internal Accounting
Information
Board of directors
Chief executive officer (CEO)
Chief financial officer (CFO)
Vice presidents
Business unit managers
Plant managers
Store managers
Line supervisors

1-11
Objectives of Management
Accounting Information

To
Tohelp
helpachieve
achieve
goals
goalsand
and
missions
missions

To
Tohelp
helpevaluate
evaluate
and
andreward
reward
decision
decisionmakers
makers

1-12
Characteristics of Management
Accounting Information
Timeliness
Timeliness
Identify
Identify
AAMeans Decision
DecisionMaker
Meanstotoan
an Maker
End
End

Measures
Measuresof of Oriented
OrientedToward
Toward
Efficiency
Efficiencyand
and Future
Future
Effectiveness
Effectiveness

1-13
 Competence, Judgment and
Ethical Behavior
Certified Public Accountant (CPA)
Certified Management Accountant (CMA)
Certified Internal Auditor (CIA)

Ethical behavior is the

cornerstone of the
accounting
profession.

1-14
 Careers in Accounting

Public Accounting
Management Accounting
Governmental Accounting
Accounting Education

1-15
 End of Chapter 1

McGraw-Hill/Irwin 1-16