Financial Statements and Business Decisions

Chapter 1

McGraw-Hill/Irwin © 2009 The McGraw-Hill Companies, Inc.

McGraw-Hill/Irwin Slide 2

How are Generally Accepted Accounting Principles Determined?

Our accounting system has a long and distinguished history. An Italian monk named Luca

Pacioli, published the first elements of double-entry bookkeeping in 1494.

Prior to 1933, the management teams of most companies were free to choose the accounting principles used to keep track of its transactions.

McGraw-Hill/Irwin Slide 3

Accounting is the basis of civilization.

McGraw-Hill/Irwin Slide 4

Prayer to Saint Matthew Dear Levi, now known as Matthew,

you were first a publican, a tax collector, and then a gatherer of souls for Christ after immediately following his call. Later you wrote

wonderful accounts for your Jewish brethren of what Jesus, descendant of David, said and did as Teacher

and Savior.

Make all accountants imitate your example in giving careful and honest

accounts.

McGraw-Hill/Irwin Slide 5

McGraw-Hill/Irwin Slide 6

Auditors take a 1988 class at Andersen's St. Charles training center. (Tribune file photo)

McGraw-Hill/Irwin Slide 7

Strategic and Critical Thinking Problem Solving and Decision Making Risk Analysis and Measurement Research and Reporting Technology Resource Management Communication Leadership and Team Building Business and Client Focus

Accounting Professionals

Hiring Opportunities Sector Jobs: 15.7 % Increase By 2020 Bureau of Labor Statistics

Tailor Your Career “Computer & Cubicle”? “People Oriented”?

McGraw-Hill/Irwin Slide 9

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ACCOUNTING - THE BASIS OF DECISION MAKING

Accounting is the “language of business” Accounting is the information system that Measures business activities Processes that information into reports Communicates the results to decision makers

© 2001 Prentice Hall Business Publishing Financial Accounting, 4/e Harrison & Horngren

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McGraw-Hill/Irwin Slide 11

FOR IMMEDIATE RELEASE April 23, 2014 Norfolk Southern reports first-quarter 2014 results: Railway operating revenues were $2.7 billion. Income from railway operations was $667 million. Net income was $368 million in 2014 as compared to $390 million in 2013. Diluted earnings per share was $1.17. The first-quarter railway operating ratio was 75.2 percent.

McGraw-Hill/Irwin Slide 12

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McGraw-Hill/Irwin Slide 15

Optional Assignment (Encouraged) Choose a publicly traded company Order an “Investor’s Package” Annual Report Form 10-K Proxy Statement By Internet from company

Have material mailed to you Review that material that you receive Optional: Review material with prof

No Meetings After 7/20

McGraw-Hill/Irwin Slide 17

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Companies of Interest – Fall 2012

Understanding the Business

The Players Investors Creditors

Managers

The Business

Operations

1. Purchase parts and labor

2. Manufacture product

3. Sell products to customers

4. Collect cash from customers and pay

creditors

$ $

The Accounting System

Collects and processes financial information

Reports information to decision

makers

Managers (internal decision

makers)

Investors and Creditors (external decision makers)

The Accounting System

Accounting System

Financial Accounting System Periodic financial statements and

related disclosures

Managerial Accounting System Detailed plans and continuous

performance reports

External Decision Makers Investors, creditors,

suppliers, customers, etc.

Internal Decision Makers Managers throughout the

organization

The Accounting System and Decision Makers

Cash

Equipment

Inventory

Notes Payable

An organized format used by companies to accumulate the

dollar effects of transactions.

McGraw-Hill/Irwin Slide 22

The Accounting System and Decision Makers

An organized format used by companies to accumulate the dollar effects of

transactions.

Manual System Fully Digital System