Chapter1Outline - CHAPTER REVIEW Accounting Defined 1....

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CHAPTER REVIEW Accounting Defined 1. (S.O. 1) Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users. a.The first part of the process, identifying, involves selecting those events that are considered evidence of economic activity relevant to a particular business organization. b. Recording is the keeping of a systematic, chronological diary of events, measured in dollars and cents. c. Communication occurs through the preparation and distribution of accounting reports. 2. The accounting process consists of: Identification Recording Communication. 3. (S.O. 2) Internal users of accounting information are managers who plan, organize, and run a business. These include marketing managers, production supervisors, finance directors, and company officers. 4. External users include investors, creditors, taxing authorities, regulatory agencies, labor unions, customers, and economic planners outside the business. 5. Bookkeeping is not the same as accounting. Bookkeeping involves only the recording of economic events, while accounting includes identification, recording, and communication. Bookkeeping is therefore only a part of accounting. d. Accounting is divided into financial versus managerial accounting. Financial accounting is the field of accounting that provides economic and financial information for investors, creditors, and other external users. Managerial accounting provides economic and financial information for managers and other internal users. Ethics 7. (S.O. 3) The standards of conduct by which one’s actions are judged as right or wrong, honest or dishonest, fair or not fair, are ethics. The process of analyzing ethical issues is to recognize that an ethical issue is involved, identify and analyze the principle elements in the situation (especially those harmed or benefited), identify the alternatives and weigh the impact of each alternative on the various stakeholders, then select the most ethical alternative. GAAP and the Cost Principle
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Chapter1Outline - CHAPTER REVIEW Accounting Defined 1....

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