ACCOUNTING INFORMATION FOR

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CHAPTER 1

• ACCOUNTING INFORMATION FOR
• DECISION MAKERS

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Objectives of Financial Reporting

• Provide information for decision making (provide
  information about profitability, solvency, and
  cash flow prospects)
• Provide information about its financial resources
• Provide information about obligations to
  investors and creditors

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External Users
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Objectives of Users
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Uses of Financial Statements

• Primary users are creditors and investors
• Creditors
• lend company money
• extend either short-term or long-term credit
• expects to receive payments of principal and
  interest

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Uses of Financial Statements

• Investors
• buy and sell shares
• interested in dividends and increase in share
  price
• Both creditors and investors are interested in
  solvency and profitablility
• Solvency - companys ability to pay all debts
• Profitability- measures whether or not company
  can generate a profit

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Types of Accounting Information
FINANCIAL
TAX
MANAGERIAL
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Financial Accounting

• Identify, measure and record the business
  transactions
• Classify the effects of similar transactions in a
  manner that is useful to management and used in
  accounting reports
• Summarize, interpret and communicate the
  information

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Financial Reporting

• The Primary Financial Statements
• Balance Sheet
• Income Statement
• Cash Flow Statement

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Integrity of Accounting Information

• Generally accepted accounting principles (GAAP)
• Internal Control Structure
• Audits of financial statements
• Accounting Standards Board
• of the Canadian Institute of
• Chartered Accountants
• Securities commissions

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Ethics and Professional Judgment

• Judgment is used in deciding which accounting
  principles to apply
• tempting to use principles that make company look
  favourable
• Ethics is the principle of right or wrong conduct
• involves acting in a manner that is consistent
  with the values of society

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Integrity of Accounting Information

• Professional Organizations
• Canadian Institute of Chartered Accountants
• Society of Management Accountants
• of Canada
• Certified General Accountants
• Association of Canada

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Career in Accounting

• Public Accounting
• Management Accounting
• Government Accounting
• Accounting Education

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Annual Reports

• Document issued annually by publicly owned
  corporations to their shareholders
• Includes
• managements report
• auditors report
• financial statements
• notes to financial statement
• management discussions and analysis

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Hot Dog Business

• Owners provide the funds
• These funds are used by the managers of the
  company to buy
• Equipment
• Inventory
• Other Assets
• Managers develop plans set goals
• eg. Make a profit
• eg. Sell a high quality product at a low profit

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Hot Dog Business

• As the business operates
• Goods are sold (Revenue)
• Expenses are incurred
• Profit is invested in inventory, equipment, etc.
• Management - Prepare financial statements
• External Auditors - Review financial statements
• Users - Use them to make decisions