Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
1. Demonstrate the role that accounting and financial
information play for a business and for its
2. Identify the different disciplines within the
3. List the steps in the accounting cycle, distinguish
between accounting and bookkeeping, and explain
how computers are used in accounting.
4. Explain how the major financial statements differ.
5. Demonstrate the application of ratio analysis in
reporting financial information.
• Hilmarsson missed an
Icelandic treat called skyr, a
thick, strained, protein-rich
• He perfected his yogurt and
contacted a former professor
for help with financing.
• Distribution raised cost
problems that affected cash
NAME that COMPANY
Until the development of accounting software
simplified the accounting process, accountants
had to enter all financial information by hand.
Today accounting software makes it possible
for businesses to have financial information
available whenever they need it. Name two
companies that provide accounting software for
Name those companies!
• Accounting -- Recording, classifying, summarizing
and interpreting of financial events and transactions
in an organization to provide interested parties
needed financial information.
• Outside parties - like employees, owners,
creditors, unions, investors and the government make use of a firm’s accounting information.
The ACCOUNTING SYSTEM
• Managerial Accounting -- Provides information
and analysis to managers inside the organization to
assist them in decision making.
• Managerial accounting is involved with:
- Costs of production
- Costs of marketing
- Preparation and control of budgets
- Minimizing tax liabilities
USERS of ACCOUNTING
Type of Report
Government tax authority
People interested in the
Financial statements found in
Managers of the firm
Financial statements and
internally distributed financial
• Financial Accounting -- Financial information and
analyses are generated for people primarily outside
the organization. Outside users are interested in
- Is the organization profitable?
- Is it able to pay its bills?
- How much debt does it owe?
• Annual Report -- A yearly statement of the financial
condition, progress, and expectations of the firm.
HOW to READ
an ANNUAL REPORT
• Key things to watch for and read:
analysis of operations
- Balance sheet
- Income statement
- Statement of cash
- Auditor’s opinion
PUBLIC vs. PRIVATE
• Private Accountants -- Work in a single firm,
government agency, or nonprofit organization.
• Public Accountants -- Provide accounting
services to individuals or businesses.
• Certified Public Accountants (CPAs) -Accountants who have passed a series of
examinations established by the
American Institute of Certified Public Accountants (A
and met a states requirements for education and
WAYS to IMPROVE
• Dodd-Frank Wall Street Reform and Consumer
Protection Act increased financial regulation by
increasing the power of the Public Company
Accounting Oversight Board.
• Act was brought on by the recent financial crisis.
Photo Courtesy of: Nancy Pelosi
AUDITING CHECKS ACCURACY
• Auditing -- Reviewing and evaluating the
information used to prepare a company’s financial
• Independent Audit -- An evaluation and unbiased
opinion about the accuracy of a company’s financial
• Certified Internal Auditors (CIAs) -- Accountants
who have a bachelor’s degree and two years of
experience in internal auditing and pass an exam
administered by the Institute of Internal Auditors.
FIGHTING ACCOUNTING FRAUD
• Sam E. Antar, a CPA, was convicted of inflating
sales figures, money laundering, and inventory
• Today, he lectures companies concerning fraud,
how to prevent it and training auditors in forensic
• Forensic accountants are trained as crime-scene
• Tax Accountants -- Accountants trained in tax law
and are responsible for preparing tax returns or
developing tax strategies.
• Government and Not-forProfit Accounting -Support for organizations
whose purpose is not
generating a profit, but
serving others according to a
duly approved budget.
• What’s the key difference between managerial
and financial accounting?
• How’s the job of a private accountant different
from that of a public accountant?
• What’s the job of an auditor? What’s an
The ACCOUNTING CYCLE
• Accounting Cycle -- A six-step procedure that
results in the preparation and analysis of the major
• Bookkeeping -- The recording of business
transactions. Bookkeepers divide a firm’s
transactions into meaningful categories and post
them into a record book or computer program called
• Double-Entry Bookkeeping -- Bookkeepers
record all transactions in two places so they can
check one list of transactions against the other for
• Ledger -- A specialized
accounting book or
program where all
information is in one
• Trial Balance -- A
summary of all the
information in the account
TECHNOLOGY and ACCOUNTING
instantly and from
• Intuit’s QuickBooks
and Sage’s Peachtree
address the specific
needs of small
• How is the job of the bookkeeper different from
• What’s the purpose of accounting journals and a
• Why does a bookkeeper prepare a trial balance?
• How has computer software helped businesses in
maintaining and compiling accounting
• Financial Statement -- A summary of all the
financial transactions that have occurred over a
• Key financial statements of
- Balance sheet
- Income statement
- Statement of cash flows