accountingIntroduction - Financial & Managerial...

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Financial & Managerial Accounting Module Introduction to Accounting Two users of accounting info: 1. Internal 2. External Two types of accounting info: 1. Financial 2. Managerial Financial accounting focuses on external users, providing quarterly and annual reports. This module provides a basic overview of accounting along with some key accounting terminology. Accounting is sometimes referred to as the language of business. Everything done in a business has accounting implications. This is because an organization’s accounting system collects, measures, and organizes all of its financial transactions. This information is then communicated to interested users so that the best business decisions can be made. Accounting Information Users Users of accounting information can be classified into two categories – those external to the organization and those internal to the organization. External users include investors, creditors, customers, suppliers, unions, and governmental organizations like the Internal Revenue Service. Internal users include an organization’s board members and its management. Let’s look at the types of accounting information each user group is most interested in. There are two basic types of accounting information – financial accounting and managerial accounting. Financial Accounting Financial accounting primarily focuses on the needs of external users by providing summarized information about the organization in the form of quarterly and annual reports. An important component of these reports is the organization’s financial statements. The primary financial statements are the income statement, the statement of changes in equity, the balance sheet, and the cash flow statement. Each of these statements is discussed in detail in upcoming modules. Introduction to Accounting Version 1.0 1 of 8
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Managerial accounting focuses on internal users, providing information on daily operations and related costs. Managerial Accounting Managerial accounting primarily focuses on the needs of internal users by providing detailed information about daily operations and related costs. Managerial accounting reports may include product cost analysis, budgets, and cost variances. A host of managerial accounting concepts are covered in a series of upcoming modules. Introduction to Accounting Version 1.0 3 of 8
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Generally Accepted Accounting Principles (GAAP): Guidelines governing how accountants record and report accounting information to external users Assets : Resources of an organization Liabilities : Obligations or claims by creditors on the assets of an organization Equity : Claim on the assets of an organization by the owners or investors Revenues : Sales made to customers Key Guidelines Let’s take a look at some of the key guidelines that govern how accountants record and report accounting information to external users. These guidelines are collectively referred to as Generally Accepted Accounting Principles (GAAP). The overall objectives of financial reporting include providing
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This note was uploaded on 01/11/2012 for the course ECON 101 taught by Professor Smith during the Spring '11 term at North Country Community College.

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accountingIntroduction - Financial & Managerial...

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