Bus 100 Ch 16

Bus 100 Ch 16 - Chapter 16 Understanding Accounting and...

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Unformatted text preview: Chapter 16 Understanding Accounting and Financial Statements L e a r n i n g G o a l s Explain the functions and importance of accounting. Identify the three basic activities involving accounting. Describe the roles played by public, management, government and not-for-profit accountants. Outline the steps in the accounting process. Explain the three principal financial statements. Discuss how financial ratios are used to analyze a firms financial strengths and weaknesses. Describe the role of budgets in a business. Explain uniform financial statements and how exchange rates influence international accounting practices. 1 2 3 4 5 6 7 8 Accounting Process of measuring, interpreting, and communicating financial information to support internal and external business decision making. USERS OF ACCOUNTING INFORMATION Open book management Sharing sensitive financial information with employees and teaching them how to understand and use financial statements. Viewing financial information may help them better understand how their work contributes to the companys success. Outsiders use financial data to evaluate investment opportunities. Accountants serve public good. Example: Volunteer programs that provide free help for low- and middle- income senior citizens file their taxes. BUSINESS ACTIVITIES INVOLVING ACCOUNTING Accounting plays a key role in each of a businesses three key areas: Financing activities Provide necessary funds to start and expand a business. Investing activities Provide valuable assets required to run a business. Operating activities Focus on selling goods and services, but they also consider expenses as important elements of sound financial management. ACCOUNTING PROFESSIONALS Public Accountants Public accountant Accountant who works for an independent accounting firm. Provide three basic services to clients: Auditing, or examining, financial records. Tax preparation, planning, and related services. Management consulting for an independent accounting firm. Four largest firms dominate the industry: Deloitte & Touche, Ernst & Young, KPMG, and PricewaterhouseCoopers....
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Bus 100 Ch 16 - Chapter 16 Understanding Accounting and...

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