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Accounting for decision makers - Lectures 1 & 2

Accounting for decision makers - Lectures 1 & 2 -...

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ACCOUNTING FOR DECISION MAKERS – LECTURES 1 & 2 INTRODUCTION – WHAT IS ACCOUNTING? Overview of Week 1 Lectures In this week’s two lectures we will consider: o What is accounting? Debunk some myths: Accounting is not just about bookkeeping – Most small businesses do not need bookkeeping and manage their own accounts. Accounting is more so what to do with the information rather than just recording it down. Accounting is not just about the application of maths. Accounting information is not always ‘accurate’ or ‘exact’ – Eg: The accurate or true profit cannot be given. A true and fair view is to be given, but ‘the’ true view cannot be given. Accounting is not an exact science. o Why might an understanding of accounting be valuable? So to gain an understanding about money. o Accounting as a means of telling a (primarily) financial ‘story’ about an organisation Different readers and preparers of the stories Ways for telling the story (such as financial statements/reports) Challenges – language/grammar of accountants – How to read the story of financial statements. o Surprisingly, the story about a specific organisation or the same set of events can be told in many different ways, including different figures. o Why can the accounting story about the same organisation be told in different ways: Importance of history in the development of accounting practice – Hence why a story can be told in many different ways. Accounting serves different roles – Eg: Accountability for tax payer’s money, investment or credit roles. May also be involved with people who want to invest. People react to accounting information in various ways (i.e., they have a vested interest in what the story tells). o Institutional arrangements and players that impact upon the accounting story:
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Accounting profession Various government and private sector regulators Role of accounting concepts and accounting standard – Certain rules when preparing accounting reports. What is accounting? Accounting is the process of identifying, measuring and communicating economic information about an entity to a variety of users for decision making purposes (traditional view). o The gathering of information, presenting it and communicating it across as a story that is useful for accountability or investing. But also now doing all this with social and environmental information (e.g. so-called ‘triple bottom line reporting’). Thus accounting is broader than just financial information. o Social accounting – Gathering information about the relationship of our employees, based on several factors. o Environmental accounting – Reporting on issues such as climate change, various environmental issues.
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