MODULE 1 NOTES.docx - MODULE 1 NOTES CHAPTER 1 The American Accounting Association defines accounting as the process of identifying measuring and

MODULE 1 NOTES.docx - MODULE 1 NOTES CHAPTER 1 The American...

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MODULE 1 NOTES CHAPTER 1 The American Accounting Association defines accountingas “the process of identifying, measuring, and communicating economic information to permit informed judgements and decisions by the users of the information.”So, it’s a measurement and communication process used to report used to report on the activities of profit-seeking business organizations and not-for-profit organizations. Accounting supplies info that permits informed judgements and decisions by users of the data.The accounting process provides financial data for a broad range of individuals whose objectives in studying the data vary widely. It supplies management with significant financial data useful for decision making. Accountantsreduce uncertainty by using personal judgment to quantify the future financial impact of taking or delaying action. They also provide financial information for stakeholders, prepare financial statements such as income statement, statement of retained earnings, a balance sheet, and a statement of cash flows. They prepare tax returns and fulfill other governmental filing requirements as well.Bookkeepingis a mechanical process that records routine economic activities of a business. Accounting includes bookkeeping but goes well beyond that. Accountantsanalyze & interpret financial info, prepare financial statements, conduct audits, design accounting systems, prepare special business and financial studies, prepare forecasts and budgets, and provide tax services. Various branches of accounting: public accounting, management (industrial accounting), governmental or other not-for profit accounting, and higher education. Public accounting- offers professional accounting and related services for a fee to companies, other organizations, and individuals. An accountant can become a CPA by passing an exam prepared & graded by the American Institute of Certified Public Accountants, as well as meeting other requirements (specific # of college credits, certain # of years in public accounting, industry, or government, and lived in that state a certain length of time). Big Four Firms are: Deloitte & Touche, Ernst & Young,KPMG, & Pricewaterhouse Coopers. Functions performed by accountants:Observe, identify, and measure events; record, classify, and summarize measurements; and report economic events and interpret financial statements.

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