Chapter 1

Managerial accounting includes what opportunities?

-General accounting -Cost accounting -Budgeting -Internal auditing -Consulting -Controller -Treasurer -Strategy

Distribution of Accounting Jobs

58% Private accounting 19% Government, not-for-profit and education 23% public accounting

Accounting serves many users who can be divided into two groups: _________ and _________.

External and internal

External Users vs Internal Users

External users are not directly involved in running the organization, and include lenders, shareholders, governments, consumer groups, external auditors, and customers. External users have limited access to an organization's information, yet their business decisions depend on information that is reliable, relevant, and comparable. Internal Users of accounting information are those directly involved in managing and operating an organization such as the chief executive officer (CEO), chief financial officer (CFO), chief audit executive (CAE), treasurer, and other executive and managerial-level employees.

CAE

chief audit executive

What is the three-step process for making ethical decisions?

-Identify ethical concerns, using personal ethics to recognize an ethical concern -Analyze options, considering all good and bad consequences -Make ethical decision, choosing the best option after weighing all consequences

Accounting related accounting includes what opportunities?

-Lenders -Consultants -Analysts -Traders -Directors -Underwriters -Planners -Appraisers -FBI investigators -Market researchers -System designers -Merger services -Business valuation -Forensic accounting -litigation support -Entrepreneurs

Financial accounting includes what opportunities?

-Preparation -Analysis -Auditing -Regulatory -Consulting -Planning -Criminal investigation

Taxation accounting includes what opportunities?

-Preparation -Planning -Regulatory -Investigations -Consulting -Enforcement -Legal services -Estate plans

An organization's social responsibility can include...

-donations to hospitals, colleges, community programs, and law enforcement -Programs to reduce pollution, increase product safety, improve worker conditions, and support continuing education -Discounts to students and senior citizens -Sponsor events such as the Special Olympics and summer reading programs

The fraud triangle

A model consisting of three factors that must exist for a person to commit fraud: -Opportunity A person must envision a way to commit fraud with a low perceived risk of getting caught. Employers can directly reduce this risk. Pre-emplyment background check is often given by employers to reduce this possibility. -Pressure A person must have some pressure to commit fraud. Examples are unpaid bills and addictions. -Rationalization A person who rationalizes fails to see the criminal nature of the fraud or attempts to justify the action.

Accounting

An information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organizations business activities.

Why is accounting often called the language of business?

Because all organizations set up an accounting information system to communicate data to help people make better decisions.

Ethics

Beliefs that distinguish right from wrong, or accepted standards of good and bad behavior

Professional standings by certificate might include

CPA- Certified public accountant CMA - Certificate in management accounting CIA - Certificate in Internal Auditing CB - Certified bookkeeper CPP - Certified payroll professional PFS - Personal financial specialist CFE - Certified fraud examiner CrFA - Certified forensic accountant

CEO

Chief executive director

CFO

Chief financial officer

Examples of our most common contact with accounting is through...

Credit approvals, checking accounts, tax forms, and payroll (which all tend to focus on the record keeping parts of accounting).

The four broad areas of opportunities

Financial, managerial, taxation, and accounting-related

I, R, C

Identify - Select transactions and events Record - Input, measure, and log Communicating - prepare, analyze, and interpret

How might certain external users make decisions based on their accounting information?

Lenders (creditors) Loan money or other resources to an organization. Examples of lenders are banks, savings and loans, co-ops, and mortgage and finance companies. Lenders look for information to help them assess whether an organization is likely to repay its loans with interest. Shareholders (investors) Are the owners of a corporation. They use accounting reports in deciding whether to buy, hold, or sell stock. Directors Are typically elected to a board of directors to oversee their interests in an organization. Since directors are responsible to shareholders, their information needs are similar. External (Independent) auditors Responsible for examining financial statements to verify that they are prepared according to generally accepted accounting principles. Nonexecutive employees and labor unions Use financial statements to judge the fairness of wages, assess job prospects, and bargain for better wages. Regulators Usually have legal authority over certain activities and organizations. For example, the Internal Revenue Service (IRS) and other tax authorities require organizations to file accounting reports in computing taxes. Other regulators include utility boards that use accounting information to set utility rates and securities regulators that require reports for companies that sell their stock to the public Voters, legislators, and government officials Use accounting information to monitor and evaluate government receipts and expenses. Contributors to nonprofit organizations use accounting information to evaluate the use and impact of their donations Suppliers use accounting information to judge the soundness of a customer before making sales on credit Customers use financial reports to assess the staying power of potential suppliers

The key to dealing with fraud from happening is to focus on ______

Prevention

Internal controls

Procedures set up to protect company property and equipment, ensure reliable accounting reports, promote efficiency, and encourage adherence to company policies, examples being good records, locks, passwords, and guards, and independent reviews.

How might certain internal users make decisions based on accounting information?

Research and development managers need information about projected costs and Revenues of any proposed changes in products and services Purchasing manager Need to know what, when, and how much to purchase Human resource managers need information about employees' payroll, benefits, performance, and compensation. Production managers depend on information to monitor costs and ensure quality Distribution managers need reports for timely, accurate, and efficient delivery of products and services Marketing managers use reports about sales and costs to target consumers, set prices, and monitor consumer needs, tastes, and price concerns. Service managers Require information on the costs and benefits of looking after products and services.

Financial Accounting

The area of accounting aimed at serving external users by providing them with general-purpose financial statements.

General-purpose

The broad range of purposes for which external users rely on these statements

Recordkeeping (bookkeeping)

The recording of transactions and events, either manually or electronically.