Introduction to accounting and finance

1. OBJECTIVES You should be able to: Explain the nature and roles of accounting and finance Identify the main users of financial information and discuss their needs Distinguish between financial and management accounting Explain why an understanding of accounting and finance is likely to be relevant to your needs Introduction to accounting and finance

2. Customers Competitors Owners Employees and their representatives Managers Business organisation Lenders Government Community representatives Investment analysts Suppliers Main users of financial information relating to a business organisation

3. Materiality Cost/Benefit Comparability Characteristics that make financial information useful Relevance Reliability Understandability Necessary for including information in thefinancial statements Limitation to the application of the qualitativecharacteristics The characteristics that influence the usefulness of accounting information

4. Information analysis Information identification Information recording Information reporting The accounting information system

5. Step 1 Identify business objectives Step 2 Consider options Prepare a long-term plan based on the most appropriate option(s) Step 3 Step 4 Prepare short-term plans (budgets) Perform and collect information on actual performance Step 5 Respond to divergences between plans and actuals, and exercise control Step 6 Step 7 Revise plans (and budgets) if necessary The planning and control process

6. The major differences concern: Nature of the reports produced Level of detail The existence of regulations Reporting interval Time horizon Range and quality of information Financial and management accounting