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ACCOUNTINGACCOUNTING

eleventh edition

Williams

Haka

Bettner

Meigs

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ACCOUNTING:The Basis for Business Decisions

Chapter

1

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Accounting

information

The accounting

process

Decision makers

Economic activities

Actions (decisions)

Accounting “links” decision

makers with economic

activities and with the results of

their decisions.

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Types of Accounting InformationTypes of Accounting Information

Financial

Managerial

Tax

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Information Users

InvestorsCreditors ManagersOwnersCustomersEmployeesRegulators -SEC -IRS -EPA

Information Users

InvestorsCreditors ManagersOwnersCustomersEmployeesRegulators -SEC -IRS -EPA

Decisions Supported

Performance evaluationsStock InvestmentsTax strategiesLabor relationsResource allocationsLending decisionsBorrowings

Decisions Supported

Performance evaluationsStock InvestmentsTax strategiesLabor relationsResource allocationsLending decisionsBorrowings

Financial Information Provided

Profitability

Financial Position

Cash Flows

Financial Information Provided

Profitability

Financial Position

Cash Flows

Information SystemInformation System

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Basic Functions of an Accounting System

Basic Functions of an Accounting System

Interpret and record business

transactions.

Payment

Car

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Basic Functions of an Accounting System

Basic Functions of an Accounting System

Summarize and

communicate information to

decision makers.

Classify similar

transactions into useful

reports.

Interpret and record business

transactions.

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Objectives of External Financial Reporting

Objectives of External Financial Reporting

Cash Flow ProspectsInvestors Creditors

Return on Investment

Periodic dividends

Periodic interest

Return of Investment

Sale of ownership at a

future date

Repayment of loan at a

future date

The primary external users of financial information are investors and creditors.

The primary external users of financial information are investors and creditors.

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Information about economic resources, claims to resources, and changes in resources and claims.

Information useful in assessing amount, timing and uncertainty of

future cash flows.

Information useful in making investment and credit decisions.

(Specific)

(General)

Objectives of

Financial Reporting

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Financial Reporting andFinancial Statements

Financial Reporting andFinancial Statements

IncomeStatement

BalanceSheet

Statementof CashFlows

Other Information:•Industry•Competitors•Economy-wide

Other Information:•Industry•Competitors•Economy-wide

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Characteristics of Externally Reported Information

Characteristics of Externally Reported Information

A Means to an End

A Means to an End

Broader than Financial

Statements

Broader than Financial

Statements

Historical in Nature

Historical in Nature

Results from Inexact and Approximate Measures

Results from Inexact and Approximate Measures

Based on General Purpose

Assumption

Based on General Purpose

Assumption

Usefulness Enhanced via Explanation

Usefulness Enhanced via Explanation

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Users of Internal Accounting Information

Users of Internal Accounting Information

Board of DirectorsChief Executive Officer Chief Financial OfficerVice PresidentsBusiness Unit ManagersPlant ManagersStore ManagersLine Supervisors

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Typical S im ple O rganization C hart

PlantAccountant

PlantManager

PlantAccountant

PlantManager

Business UnitManager

V.P. HumanResources

V.P. InformationServices

Chief FinancialOfficer (CFO)

Chief ExecutiveOfficer(CEO)

Board ofDirectors(Owners)

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Characteristics of Internal Accounting Information

Characteristics of Internal Accounting Information

TimelinessTimeliness

Identify Decision-Making

Authority

Identify Decision-Making

Authority

Oriented Toward Future

Oriented Toward Future

Measures of Efficiency and Effectiveness

Measures of Efficiency and Effectiveness

A Means to an End

A Means to an End

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End of Chapter 1End of Chapter 1