INTERMEDIATE ACCOUNTING VOL. 1 Chapter 1.docx - CHAPTER 1 The Development of Accounting Profession THE NATURE OF ACCOUNTING THE USERS OF FINANCIAL

INTERMEDIATE ACCOUNTING VOL. 1 Chapter 1.docx - CHAPTER 1...

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CHAPTER 1 The Development of Accounting Profession THE NATURE OF ACCOUNTING & THE USERS OF FINANCIAL INFORMATION Accounting – process of identifying, measuring, and communicating economic information to permit informed judgment and decision by users of the information. Internal Users – users who have ready access to specific types of accounting information External Users – do not have ready access to financial reports and rely heavily on negotiations and regulations to obtain information about a business enterprise. They have diversified information needs. Present and potential creditors Assess the ability of the enterprise to pay its loans and interest attaching to such loans. Suppliers Dependent upon the continuation of an enterprise as a major customer Customers Interested in the continuance of the enterprise Government and its Agencies Determine whether business entities comply w/ prescribed rules and regulations; interested in the allocation of resources Public Interested about the trends and the range of business entities economic activities Employees Stability and profitability of the enterprise Investors Make decisions whether they buy, hold, sell equity investments Direct Interest Users – use financial information as a tool to protect their own interest in the enterprise Owners Managers Creditors Suppliers Customers Employees Taxing Authority Indirect Interest Users – provide advice or protect the interest of a direct user Regulatory Agencies – (SEC) protect the interest of the investors and the public. Labor Unions – protect the interest of employees Financial and Legal Consultants – provide advice and assistance to their clients. Reporting/Accounting/Business Entity a business enterprise, a government unit a not-for-profit organization an individual a unit within an enterprise have a different personality from that of its units. capable of controlling its own economic resources and incurring economic obligations BRANCHES OF ACCOUNTING Financial Accounting - broadest branch of accounting - for external users - assumes that the external users have common information needs (to evaluate the profitability, liquidity and stability) Management Accounting - for internal users - making and implementing short-term and long- range plans for the enterprise - information provided is not structured - not necessarily conforming to the accounting standards Cost Accounting - measurement and recognition of cost of services provided or products manufactured - cost per unit Tax Accounting - concerned w/ the computation of taxes and preparation of tax returns Government Accounting - encompasses the process of analyzing, classifying, summarizing and communicating all transactions involving the receipt and disposition of government funds THE DEVELOPMENT OF THE ACCOUNTING PROFESSION AND THE STANDARD-SETTING PROCESS Pioneers in the Development of Accounting: - United States of America & United Kingdom
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  • Spring '16
  • Albus Dumbledore
  • Accounting, International Financial Reporting Standards

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