BUSI 1800 Chapter Notes - Chapter 16: Management Accounting, Tax Accounting In The United States, Financial Statement
2 May 2018
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Department
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BUSI 1800
Chapter 16: Understanding Accounting and Financial Information
Accounting: The recording, classifying, summarizing, and interpreting of financial events and
transactions to provide management and other interested parties the information they need to
make good decisions
Financial transactions: include buying and selling goods and services, acquiring insurance,
paying employees and using supplies
Method used to record and summarize accounting data into reports is an accounting system.
Inputs
Accounting Documents
Processing
Outputs
Financial Statements
-Sales documents
-Purchasing documents
-Shipping documents
-Payroll records
-Bank records
-Travel records
-Entertainment records
1. Entries are made into
journals: recording
2. The effects of these
journal entries are
transferred or posted into
ledgers: classifying
3. All accounts are
summarized
-Balance sheet
-Income statement
-Statement of cash flows
-Other reports (ex. Annual
reports)
Accounting Disciplines:
-The accounting profession is divided into 5 key working areas (1. Managerial accounting, 2.
Financial accounting, 3. Auditing, 4. Tax accounting, and 5. Government and not-for-profit
accounting)
Managerial accounting:
• Accounting used to provide information and analyses to managers inside the
organization to assist them in decision making
• Concerned with measuring and reporting costs or production, marketing, and other
functions; preparing budgets (planning); checking whether or not business units are
staying within their budgets (controlling; and designing strategies to minimize taxes
Financial Accounting:
• Differs from managerial accounting in that the information and analyses it generates are
for people primarily outside the organization
• The information goes not only to company owner, managers, and employees but also to
creditors and lenders, unions, customers, suppliers, government agencies, and the
general public
Annual report: a yearly statement of the financial condition, progress, and expectations of an
organization
Private accountant: an accountant who works for a single firm, government agency, or not-for-
profit organization
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Annual Report Information
Public accountant: an accountant who provides their accounting services to individuals or
business, such as designing an accounting system and analyzing the financial strength of an
organization on a fee basis, large accounting and auditing firms operate internationally to serve
large transnational companies
International financial reporting standards (IFRS): The common set of accounting principles,
stadads, ad poedues that aoutat’s ad opaies use to opile fiaial stateets
Auditing:
• The jo of eieig ad ealuatig the eods used to pepae a opay’s fiaial
statement
• Private accountants within the organization often perform internal audits to guarantee
that the organization is carrying out proper accounting procedures and financial
reporting
Idepedet audit: A ealuatio ad uiased opiio aout the auay of a opay’s
financial statements
Forensic accounting: A relatively new area of accounting that focuses its attention on
fraudulent activity, gathers evidence for presentation in court of law, evidence comes from a
review of financial and other records
Tax accountant:
• An accountant trained in tax law and responsible for preparing tax returns or developing
tax strategies
• Since governments often change tax policies according to specific needs or objectives,
the job of the tax accountant is certainly challenging
Government and non-for-profit (non-profit) accounting:
• Accounting system for organizations whose purpose is not generating a profit but rather
serving ratepayers, taxpayers, and others accounting to a duly approved budget
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Accounting: the recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions. Financial transactions: include buying and selling goods and services, acquiring insurance, paying employees and using supplies. Method used to record and summarize accounting data into reports is an accounting system. Processing: entries are made into journals: recording, the effects of these journal entries are transferred or posted into ledgers: classifying, all accounts are summarized. The accounting profession is divided into 5 key working areas (1. Annual report: a yearly statement of the financial condition, progress, and expectations of an organization. Private accountant: an accountant who works for a single firm, government agency, or not-for- profit organization. International financial reporting standards (ifrs): the common set of accounting principles, sta(cid:374)da(cid:396)ds, a(cid:374)d p(cid:396)o(cid:272)edu(cid:396)es that a(cid:272)(cid:272)ou(cid:374)ta(cid:374)t"s ad (cid:272)o(cid:373)pa(cid:374)ies use to (cid:272)o(cid:373)pile fi(cid:374)a(cid:374)(cid:272)ial state(cid:373)e(cid:374)ts.
