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Financial & ManagerialAccounting

The Basis for Business Decisions

TWELFTH EDITION

Williams Haka Bettner Meigs

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ACCOUNTING:Information for Decision Making

Chapter

1

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Accounting

information

The

accounting

process

Decision

makers

Economic

activities

Actions

(decisions)

Accounting

links decision

makers witheconomic

activities and

with the results of

their decisions.

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Types of Accounting Information

Financial

Managerial

Tax

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Information

Users

Investors

Creditors

Managers

Owners

Customers

Employees

Regulatory

agencies-SEC

-IRS

-EPA

Decision Support

CVP analysis

Performance

evaluation

Incremental

analysis

Budgeting

Capital

allocation

Earnings pershare

Ratio analysis

Information System

Cost & Revenue

Determination

Job costing

Process costing

ABC

Sales

Assets &

Liabilities

Plant and

equipment

Loans & equity

Receivables,

payables & cash

Cash Flows

From operations

From financingFrom investing

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Basic Functions of an AccountingSystem

Interpretand record

business

transactions.

Payment

Car

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Basic Functions of an AccountingSystem

Summarizeand

communicate

information to

decisionmakers.

Classify

similar

transactions

into usefulreports.

Interpretand record

business

transactions.

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Objectives of External FinancialReporting

Cash Flow Prospects

Investors 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

investorsand creditors.

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Information about economic

resources, claims to resources, and

changes in resources and claims.

Information useful in assessingamount, timing and uncertainty of

future cash flows.

Information useful in making

investment and credit decisions.

(Specific)

(General)

Objectives

ofFinancial

Reporting

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Objectives of External FinancialReporting

The primaryfinancial

statements.

Income Statement

Balance Sheet

Statement of Cash Flows

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Financial

Statements

Financial Statements:

A Lens to View Business

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Characteristics of ExternallyReported Information

A Means to

an End

Broader than

Financial

Statements

Historical in

Nature

Results from Inexact and

Approximate Measures

Based on

General PurposeAssumption

Usefulness

Enhanced via

Explanation

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Internal Users of AccountingInformation

Board of Directors

Chief Executive Officer

Chief Financial Officer

Vice Presidents

Business Unit Managers

Plant Managers

Store Managers Line Supervisors

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Typical Simple Organization Chart

Plant

Accountant

PlantManager

Plant

Accountant

PlantManager

Business UnitManager

V.P. HumanResources

V.P. InformationServices

Chief FinancialOfficer (CFO)

Chief ExecutiveOfficer

(CEO)

Board ofDirectors(Owners)

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Information about decision-making

authority, for decision-making support, and

for evaluating and rewarding decision-makingperformance.

Information useful in assessing

both the past performance and futuredirections of the enterprise and information

from external and internal sources.

Information useful to help the enterprise

achieve its goal, objectives and mission.

Objectives

ofManagerial

Reporting

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Characteristics of ManagementAccounting Information

Timeliness

Identify

Decision-

MakingAuthority

OrientedToward

Future

Measures ofEfficiency and

Effectiveness

A Means to

an End

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Integrity of Accounting Information

Institutional Features

Generally Accepted Accounting Principles (GAAP)

Financial Accounting Standards Board

Securities and Exchange Commission

Internal Control Structure

Audits

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Integrity of Accounting Information

Professional Organizations

American Institute of Certified Public Accountants

Institute of Management Accountants

Institute of Internal Auditors

American Accounting Association

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Integrity of Accounting Information

Competence, Judgment and Ethical Behavior

Certified Public Accountants (CPAs)

Certificate in Management Accounting (CMA)

Certificate in Internal Auditing (CIA)

Code of Professional Conduct

CP

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End of Chapter 1

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