Notes on Financial and Managerial Accounting for Decision Making | ACCTG 211, Study notes of Accounting

Download Notes on Financial and Managerial Accounting for Decision Making | ACCTG 211 and more Study notes Accounting in PDF only on Docsity! CHAPTER 1 ACCOUNTING INFORMATION SYSTEM MEASURES PROCESSES COMMUNICATES A SERVICE DECISION MAKERS NEED TO MAKE REASONED DECISIONS GOALS PROFITABILITY=ADEQUATE RETURN TO OWNERS LIQUIDITY=ABILITY TO HAVE CASH FOR BILLS PURSUE GOALS BY: OPERATING ACTIVITIES INVESTING ACTIVITIES FINANCING ACTIVITIES INFORMATION MANAGEMENT ACCOUNTING INTERNAL DECISION MAKERS EXTERNAL DECISION MAKERS PROCESSING BOOKKEEPING=MECHANICAL REPETITIVE COMPUTERS=COLLECT ORGANIZE COMMUNICATE MIS=INTERCONNECTIVE SYSTEMS THAT PROVIDE INFO TO RUN THE BUSINESS ETHICS SARBANES-OXLEY ACT= REG. ACCTG. SEC= RULES FOR EXECUTIVES DECISION MAKERS USERS MANAGE DIRECT FINANCIAL INTEREST INVESTORS=STOCKHOLDERS CREDITORS= BANKS,SUPPLIERS INDIRECT FINANCIAL INTEREST TAX AUTHORITIES REGULATORY AGENCIES OTHERS=UNIONS,ANALYSTS,BROKERS MANAGEMENT FINANCING INVESTING PRODUCING MARKETING MANAGING EMPLOYEES INFO TO DECISION MAKERS NON PROFIT 30%=HOSPITALS, UNIVERSITIES,CHARITIES SAME GOALS ACCOUNTING MEASUREMENT BUSINESS TRANSACTIONS=ECONOMIC EVENTS MONEY MEASURE= COMMON UNIT OF MEASURE SEPARATE ENTITY FROM OWNERS FROM CREDITORS FORMS OF BUSINESS CORPORATION ARTICLES OF INCORP STOCKHOLDERS BOARD OF DIRECTORS GOVERNANCE=ETHICS,AUDIT COMMITTEE PARTNERSHIP TWO OR MORE OWNERS ANY OWNER CAN OBLIGATE THE BUSINESS SOLE PROPRIETORSHIP ONE OWNER PROFITS AND LIABILITY ACCOUNTING EQUATION WHAT BUSINESS OWNS IS OWED TO CREDITORS OR OWNERS SE 3 1 a 2 c 3 b 4 c 5 a or c 6 c SE 4 1 ASSETS = $120,000 2 STOCKHOLDERS' EQUITY = $ 72,000 3 LIABILITIES = $100,000 SE 5 1 ASSETS = LIABILITIES + STOCKHOLDR'S EQUITY $240,000 = $ 180,000 +STOCKHOLDER'S EQUITY $240,000 - $180,000 = $ 60,000 STOCKHOLDER'S EQUITY = $ 60,000 SE 6 1 BEGINNING: $90,000 = LIABILITES +$50,000 LIABILITIES = $40,000 $90,000 = $40,000 + $ 50,000 CHANGE: + $30,000 + 5,000 $120,000 = $ + STOCKHOLDERS; EQUITY END: STOCKHOLDER;S EQUITY = $75,000 2 BEGINNING: ASSETS = $100,000 + $96,000 ASSETS = $196,000 $196,000 = $100,000 + $96,000 CHANGE $40,000 ($30,000) $236,000 = $70,000 + STOCKHOLDERS' EQUITY END: STOCKHOLDER;S EQUITY = $166,000 STOCKHOLDERS' EQUITY E 1 1 The primary purpose of accounting is to provide decision makers with the finan- cial information they need to make intelligent decisions. It is a valuable disci- pline because of the usefulness of the information it generates. 2 Like managers of profit-seeking businesses, managers of government and not- for-profit organizations must report to those who fund them, and they must op- erate their organizations in a financially prudent way. 3 No. Not all economic events involve exchanges of value between a business and someone else. For example, when a customer place. a n order, it is an economic event, but until the order is fulfilled, no exchange of value has taken place. 4 Accounting treats sole proprietorships, partnerships, and corporations as en- tities separate and apart from their owners because each form represents a business for which financial performance must be measured and reported. E 3 1 a 7 b 2 l 8 j 3 c 9 g 4 i 10 d 5 k 11 f 6 e 12 h E 9 1 a. A 2 a. IS b L b BS c A c IS d SE d BS e A e IS f L f BS g A g RE