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Managing Technology and information. Chapter 16 – part 1. Understanding Accounting and Financial Statements. Users of Accounting Information. People both inside and outside and organization rely on accounting information to help them make business decisions

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chapter 16 part 1

Managing Technology and information

Chapter 16 – part 1

Understanding Accounting and Financial Statements

users of accounting information
Users of Accounting Information
  • People both inside and outside and organization rely on accounting information to help them make business decisions
  • Accounting—practice of measuring, interpreting, and communicating financial information to support internal and external business decision making.
  • Accounting is sometimes called “The language of business”
business activities that involve accounting
Business Activities That Involve Accounting
  • Accountants contribute important information to help managers deal with the competitive and economic environments
  • They help others to understand, predict, and react to the technological, regulatory, and social and cultural environments
  • Accounting plays a key role in:
    • Financing
    • Investing
    • Operating
business activities that involve accounting1
Business Activities That Involve Accounting
  • Public accountant: provides accounting services to individuals or business firms for a fee
  • Management accountant: accountant employed by a business other than a public accounting firm
    • Responsible for collecting and recording financial transactions, and preparing and interpreting financial statements used by the firm’s managers
business activities that involve accounting2
Business Activities That Involve Accounting
  • Certified Public Accountants (CPA) - accountants who met specified educational and experiential requirements and passed a comprehensive examination on accounting theory and practice.
  • Other Certifications—
    • Certified Management Accountants
    • Certified Internal Auditor
business activities that involve accounting3
Business Activities That Involve Accounting
  • Government and Not-for-Profit accountants—work for federal, state, and local governments or not-for-profit organizations—perform professional services similar to those of management accountants
    • Instead of an emphasis on measuring profit or loss, they concern themselves with determining how efficiently the organizations accomplish their objectives
the accounting process
The Accounting Process
  • The Accounting Equation
    • Asset—anything of value owned or leased by a business.
    • Liability—claim against a firms assets by a creditor.
    • Owner’s equity—all claims of the proprietor, partners, or stockholders, against the assets of a firm, equal to the excess of assets over liabilities.
the accounting process1
The Accounting Process
  • The Accounting Equation
    • Relationship that states that assets equal liabilities plus owner’s equity.

Assets = Liabilities + Owner’s Equity

financial statements
Financial Statements
  • The Balance Sheet
    • Balance sheet—statement of a firm’s financial position - what it owns and the claims against its assets - at a particular point in time.
      • Similar to a photograph of the firm’s assets together with its liabilities and owners’ equity at a specific moment in time
in class
In Class
  • In small groups develop one side of the following debate:
    • Should a new gaming company share all its financial information with all employees?
    • JMK example
in class1
In Class
  • Generate a balance sheet for a new local Dairy Queen from the following
    • it owns 4 ice cream makers at $4K each
    • it rents a building for $3K per month
    • it owns a delivery new delivery truck $40K
    • it has a loan at the bank for $300K
    • all money it borrowed was used to buy the truck, ice cream makers, or is in the bank
in class2
In Class
  • To the Dairy Queen example, what are the changes to the balance sheet if:
    • it also owes $10K to the DQ franchisor
    • it is two years later and the capital has depreciated and is only worth half of what it was bought for
    • it has inventory of $2K in cream and flavoring