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ACCOUNTING A BUSINESS PERSPECTIVE Seventh Edition

ACCOUNTING A BUSINESS PERSPECTIVE Seventh Edition. ROGER H. HERMANSON JAMES DON EDWARDS MICHAEL W. MAHER. Introduction Chapter. The Accounting Environment. Pages 1-11 Very Broad Overview. Administration. Bring book to class. How to take notes. Write in your book!!. Major Challenge.

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ACCOUNTING A BUSINESS PERSPECTIVE Seventh Edition

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  1. ACCOUNTING A BUSINESS PERSPECTIVE Seventh Edition ROGER H. HERMANSON JAMES DON EDWARDS MICHAEL W. MAHER

  2. Introduction Chapter The Accounting Environment Pages 1-11 Very Broad Overview

  3. Administration Bring book to class. How to take notes. Write in your book!!

  4. Major Challenge What do you think is the biggest problem/challenge for most students taking introductory accounting? The Vocabulary! Accounting is often called “the language of business”. This is why all business students must take this course.

  5. 2 Text’s Definition of Accounting “The process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by the users of the information.”

  6. Rice’s Definition of Accounting The process of: Identifying, Measuring, Recording, Classifying, Summarizing, Reporting, and Interpreting ...

  7. Rice’s Definition of Accounting … What? Financial transactions … For whom? For interested users. Who are these interested users?

  8. Interested Users (pg. 6-7) Creditors and lenders Customers (Why?) Owners and prospective owners Employees and their unions (Why?) Government units General Public

  9. Accounting vs. Bookkeeping • Bookkeeping Mechanical process May not know why ... • Accounting Must know theory behind why... Should be able to apply theory to ...

  10. Classification of Accounting Jobs • Public Accounting • Private industry • Government • Education

  11. Public Accounting • Public Accounting Firms offer professional accounting services to clients. • Generally, the public accountant’s goal is to become a Certified Public Accountant, or CPA. • The CPA certificate is generally considered to be required to be a “member of the profession”

  12. CPA Exam • National, two-day exam • Given twice a year May and November • Given at same time in all states • Has four parts • CPA is licensed by the state

  13. Public Accounting Services • Audit Services Auditor’s Opinion or Report Auditor “attests” Only unique service • Tax Services Competition? Today’s emphasis? • Management Advisory/ Consulting Services Competition? Largest in world?

  14. Big Six Five International CPA Firms (pg. 4) • Arthur Andersen & Co. • Deloitte & Touche • Ernst & Young • KPMG Peat Marwick • PricewaterhouseCoopers As of 7-1-98

  15. Other Professional Accounting Certifications Management Accounting (CMA) Internal Auditing (CIA) See Department of Accounting Web site for important links.

  16. Two Types of Accounting • Financial Accounting • Managerial Accounting

  17. Financial Accounting Generating financial statements for external users of information about the company’s: • Results of Operations • Financial Position • Inflows and Outflows of Cash

  18. Income Statement Balance Sheet Statement of Cash Flows Financial Accounting Financial Statements must be prepared in accordance with Generally Accepted Accounting Principles (GAAP)

  19. Generally Accepted Accounting Principles (GAAP) • Common set of accounting rules followed by all public businesses. • Required by the Securities and Exchange Commission (SEC) • Often required by other external stakeholders, such as • Creditors, Lenders, Vendors, Investors • Auditors make sure they have been followed

  20. More on GAAP • Defined by the Financial Accounting Standards Board (FASB) • The FASB is the seven short fat guys (the Gurus) who hang out in Norwalk, CT

  21. Marketing decisions Financial decisions Production decisions Managerial Accounting Generates information for internal use which is crucial for decision making Resource allocation decisions

  22. Important Organizations(pp. 8 & 9) • Financial Accounting Standards Board (FASB) • American Institute of Certified Public Accountants (AICPA) • Governmental Accounting Standards Board (GASB) • Securities and Exchange Commission (SEC) • American Accounting Association (AAA) • Financial Executives Institute (FEI) • Institute of Management Accountants (IMA)

  23. Ethical conduct includes: Obeying the profession’s Code of Ethics. Doing the “right” thing. Obeying the laws. Maintaining honesty and integrity. Ethical Behavior of Accountants

  24. Miscellaneous How to Study the Chapters in this Text See pp. 10 & 11

  25. END OF INTRO

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