Accounting%20Process%20of%20measuring,%20interpreting,%20and%20communicating%20financial%20information%20to%20support%20internal%20and%20external%20business%20decision%20making.

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• Accounting Process of measuring, interpreting,
  and communicating financial information to
  support internal and external business decision
  making.
• USERS OF ACCOUNTING INFORMATION
• Owners, Stockholders, Potential Investors,
  Creditors
• Management
• Employees, Union Officials
• Lenders, Suppliers
• Government Agencies, Economic Planners, Consumer
  Groups

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 Open book management  Helps employees better
understand how their work contributes to the
companys success.  Outsiders use financial data
to evaluate investment opportunities.  Accountant
s serve public good.
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BUSINESS ACTIVITIES INVOLVING ACCOUNTING
Accounting plays a key role in each of a
businesses three key areas  Financing
activities  Investing activities  Operating
activities
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ACCOUNTING PROFESSIONALS Public
Accountants  Accountant who works for an
independent accounting firm.  Certified public
accountants (CPAs) Management Accountants  Accoun
tant employed by a business other than a public
accounting firm. Government and Not-for-Profit
Accountants  Perform professional services
similar to those of management accountants.
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• THE ACCOUNTING PROCESS
• Accounting process Set of activities involved in
  converting information about transactions into
  financial statements.
• This Set of Activities includes
• Recording
• Classifying
• summarizing individual transactions in order to
  produce financial statements
• The Process begins with
• Basic data from source documents
• The data is then recorded in chronological order
  in a ledger and classified by account
• The accounts in the ledger are then summarized
  and financial statements are prepared

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The Impact of Computers and the Internet on the
Accounting Process  Simplifies the accounting
process by automating data entry and
calculations. Software available to handle
accounting information for international
businesses. The Foundation of the Accounting
System  Generally accepted accounting principles
(GAAP). Financial Accounting Standards Board
(FASB).  Sarbanes-Oxley Act  Created the
Public Accounting Oversight Board. Added to
the reporting requirements for publicly traded
companies.
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The Accounting Equation  Assets Anything of
value owned or leased by a business.  Liability
Claim against a firms assets by a
creditor.  Owners equity All claims of the
proprietor, partners, or stockholders against the
assets of a firm.  Basic accounting
equation  Double-entry bookkeeping Process by
which accounting transactions are entered.
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FINANCIAL STATEMENTS  Provide managers with
information for evaluating organizations ability
to meet current obligations and needs, its
profitability, and its overall financial
health. The Balance Sheet  Statement of a firms
financial position at a particular point in
time. The Income Statement  Financial record of
revenues, expenses, and profits over a period of
time. The Statement of Cash Flows  Statement of
a firms cash receipts and cash payments that
presents information on its sources and uses of
cash.  Inadequate cash flow is a reason for
many business failures.
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• FINANCIAL RATIO ANALYSIS
•  Ratio analysis Tool for measuring a firms
  liquidity, profitability, and reliance on debt
  financing, as well as the effectiveness of
  managements resource utilization.
• Four Major Financial Ratio Categories
• Liquidity
• Activity
• Profitability
• Leverage

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BUDGETS Budget Planning and control tool that
reflects a firms expected sales revenues,
operating expenses, and cash receipts and
outlays. Cash budget
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INTERNATIONAL ACCOUNTING Exchange Rates Ratio
at which a countrys currency can be exchanged
for other currencies.  Financial statements must
reflect gains and losses due to changes in
exchange rates. International Accounting
Standards International Accounting Standards
Committee (IASC).