Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Chapter 1Introduction to Accounting

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IdentifiesIdentifies

RecordsRecords

CommunicatesCommunicatesRelevantRelevant

ReliableReliable

ComparableComparable

Learning Objective 1Explain the purpose and importance of accounting in the information age.

AccountingAccountingis a

system that

information

that is

to help users make better decisions.

to help users make better decisions.

LO1

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Identifying Business Activities

Recording Business Activities

Communicating

Business Activities

Accounting ActivitiesLO1

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Learning Objective 2Identify users and uses of accounting.Identify users and uses of accounting.

Internal Users

•Owners

•Managers

•Internal Auditors

•Sales Staff

•Budget Officers

•Controllers

External Users

•Lenders

•Shareholders

•Governments

•Consumer Groups

•External Auditors

•Customers

Managerial accounting provides information needs for internal decision

makers.

Financial accounting provides external users with financial

statements.

LO2

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Learning Objective 3Identify career opportunities in accounting and related fields.

FinancialFinancial

•Preparation•Analysis•Auditing•Regulatory•Consulting•Planning•Criminal investigation

•Preparation•Analysis•Auditing•Regulatory•Consulting•Planning•Criminal investigation

ManagerialManagerial•General accounting •Cost accounting•Budgeting•Internal auditing•Consulting•Controller•Treasurer•Strategy

•General accounting •Cost accounting•Budgeting•Internal auditing•Consulting•Controller•Treasurer•Strategy

TaxationTaxation•Preparation•Planning•Regulatory•Investigations•Consulting•Enforcement•Legal services•Estate plans

•Preparation•Planning•Regulatory•Investigations•Consulting•Enforcement•Legal services•Estate plans

Accounting-related

Accounting-related

•Lenders•Consultants•Analysts•Traders•Directors•Underwriters•Planners•Appraisers

•Lenders•Consultants•Analysts•Traders•Directors•Underwriters•Planners•Appraisers

•FBI investigators•Market researchers•Systems designers•Merger services•Business valuation•Fraud investigation•Litigation support•Entrepreneurs

•FBI investigators•Market researchers•Systems designers•Merger services•Business valuation•Fraud investigation•Litigation support•Entrepreneurs

LO3

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Accounting specialists are often denoted by certifications

Certified Public Accountants

(CPA)

Certificate in Management Accounting

(CMA)

Certified Internal Auditor (CIA)

Certified Fraud Examiner (CFE)

Certified Bookkeeper (CB)

Certified Payroll Specialist (CPS)

Personal Financial

Specialist (PFS)

Certified Forensic

Accountant (CrFA)

LO3

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Accounting Jobs by Area

Government, not-for-profit, & education

15%

Public accounting

25%

Private accounting

60%

LO3

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Learning Objective 4Explain why ethics are crucial to accounting.

Ethics are beliefs that distinguish right from wrong

Ethics are accepted standards of good and bad behavior

LO4

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Identify ethical concerns

Analyze options

Make ethical decision

Use personal ethics to

recognize ethical concern.

Consider all good and bad

consequences.

Choose best option after weighing all

consequences.

Guidelines for Ethical Decision Making

LO4

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Financial accounting practice is governed by concepts and rules known as generally accepted

accounting principles (GAAP).

Financial accounting practice is governed by concepts and rules known as generally accepted

accounting principles (GAAP).

Learning Objective 5Explain the meaning of generally accepted accounting principles.

Relevant Relevant Reliable Reliable

ComparableComparable

LO5

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Learning Objective 6Identify the groups that establish generally accepted accounting principles.

Financial Accounting Standards Board is the private group that sets both broad and specific principles.

The Securities and Exchange Commission is the government group that establishes reporting

requirements for companies that issue stock to the public.

The International Accounting Standards Board (IASB) issues International Financial Reporting Standards that

identify preferred accounting practices.

LO6

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Learning Objective 7Ownership Structures

•A Proprietorship is a business owned by one person.

•A Partnership is a business owned by two or more people, called partners.

•A Corporation is a business legally separate from its owners, meaning it is responsible for its own acts and its own debts.

LO7

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End of Chapter 1