Chap1 Class Notes 2010

Chap1 Class Notes 2010 - C:\Documents and...

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Notes 2010.DOC Victor Leung ACY1111 2010 Chapter 1 1 CHAPTER ONE Why Accounting Matters I. (Obj 01) What is a ccounting? [p. 4] A. Accounting is the process of identifying, recording, and communicating the economic information of an organisation to the users. 1. Identifying is the observation and the selection of economic activities relevant to a particular organisation. 2. Recording is the keeping of a chronological diary of the events, measured in dollars and cents 3. Communication occurs through the preparation and distribution of accounting reports. B. Bookkeeping is not the same as accounting Bookkeeping usually involves only the recording of economic events and is therefore just one part of the accounting process. Accounting involves the entire process of identifying, recording, and communicating economic events. ------------------------------------------------------------------------------------- Exhibit 1 – A1 Accounting Process, Accounting Information & Decision Making ---------------------------------------------------------------------------------- II. (Obj 02) Who uses accounting data? [p. 6] Accounting data are needed by different peoples and organisations for decision-making. A. Internal users are company managers and officers. B. External users are those users outside of the business: 1. Investors use accounting information to make decisions to buy, hold or sell stock. 2. Creditors use accounting information to evaluate the risks of granting credit or lending money. 3. Other external users: These include taxing authorities, government agencies, customers and economic planners. C. Specialised accounting fields 1. Financial accounting is primarily concerned with the recording and reporting of economic data and activities for an entity. Financial accountants following generally accepted accounting principles (GAAP) in preparing reports for stockholders and the investing public. 2. Management accounting is primarily concerned with providing managers with relevant and timely information and reports for internal uses. It uses both financial accounting and estimated data to aid management in running day-to-day operations and in planning future operations. Management accountants are not restricted to using generally accepted accounting principles. III. (Obj 03) Ethics—A Fundamental Business Concept [page 8] A. Ethics are the standards of conduct by which one’s actions are judged as right or wrong, honest or dishonest, fair or not fair. Accountants follow certain standards in reporting financial information. B. In the process of analyzing and solving ethical dilemmas, the following steps should be applied [Exhibit 1-4] : 1. Recognize an ethical situation and the ethical issues involved -- use your personal ethics to identify the issues 2. Identify and analyze the principal elements in the situation -- identify the stakeholders. 3.
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This note was uploaded on 02/04/2012 for the course ACCT 2111 taught by Professor Eric during the Spring '11 term at CUHK.

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Chap1 Class Notes 2010 - C:\Documents and...

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