Accounting: Information for

Decision Making
Fifteenth Edition
Williams

Haka

Bettner

Carcello

PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
McGraw-Hill/Irwin

Copyright 2012 The McGraw-Hill Companies,

Accounting
Information for Decision Making
Chapter 1

PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
1-2

The
Accounting
Process

Economic
Activities

Actions
(decisions)

Accounting links
decision makers
with economic
activities and
with the results of
their decisions.

Decision
Makers

Accounting
Information

Reported
Results of
Actions
(decisions)
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Types of Accounting
Information
Financial

Tax

Management

1-4

Accounting Systems
An accounting system consists of the
personnel, procedures, technology, and
records used by an organization to
develop accounting information and to
communicate this information to decision
makers.

1-5

Information
Information System
System

Information
Information
Users
Users
Investors
Investors
Creditors
Creditors
Managers
Managers
Owners
Owners
Customers
Customers
Employees
Employees
Regulators
Regulators
-SEC
-SEC
-IRS
-IRS
-FTC
-FTC

Financial
Financial
Information
Information
Provided
Provided
Profitability
Profitability
Financial
Financial
position
position
Cash
Cashflows
flows

Decisions
Decisions
Supported
Supported
Performance
Performance
evaluations
evaluations
Stock
Stock
investments
investments
Tax
Taxstrategies
strategies
Labor
Laborrelations
relations
Resource
Resource
allocations
allocations
Lending
Lending
decisions
decisions
Borrowing
Borrowing
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Determining Information
Needs

Although much accounting information

clearly is essential to business operations,
management still has many choices as to
the types and amount of accounting
information to be developed.
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Basic Functions of an
Accounting System

Interpret
and record
business
transactions.

Classify
similar
transactions
into useful
reports.

Summarize
and
communicate
information to
decision
makers.
1-8

Components of Internal
Control
Control
Environment

Risk
Assessment
Control
Activities
Information and
Communication
Monitoring
1-9

External Users of
Accounting Information
Owners
Creditors
Potential investors
Labor unions
Governmental agencies
Suppliers
Customers
Trade associations
General public

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Objectives of External
Financial Reporting
Provide specific information about
economic resources, claims to resources,
and changes in resources and claims.

Provide information useful in assessing

amount, timing and uncertainty of future
cash flows.

Provide general information useful in

making investment and credit decisions.
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Objectives of External
Financial Reporting
The primary financial
statements.
Balance
Sheet

Income
Statement
Statement
of Cash
Flows
1-12

Characteristics of
Externally Reported
AAMeans
Meansto
toan
an
Information End
End
Usefulness
Usefulness
Enhanced
Enhancedvia
via
Explanation
Explanation

Broader
Broaderthan
than
Financial
Financial
Statements
Statements

Based
Basedon
onGeneralGeneralPurpose
Purpose
Assumption
Assumption

Historical
Historicalin
in
Nature
Nature

Results
Resultsfrom
fromInexact
Inexactand
and
Approximate
ApproximateMeasures
Measures
1-13

Users of Internal
Accounting Information
Board of directors
Chief executive officer (CEO)
Chief financial officer (CFO)
Vice presidents
Business unit managers
Plant managers
Store managers
Line supervisors

1-14

Owners
Board of
Directors
Chief Executive
Officer
(CEO)

V.P
Ethics

Business
Unit
Managers

V.P.
Human
Resources

Plant
Managers

Plant
Managers

Plant
Accountants

Plant
Accountants

Typical
Simple
Organization
Chart
V.P.
Information
Services

Chief
Financial
Officer (CFO)

Controller

Treasurer

1-15

Objectives of
Management Accounting
Information
To
Tohelp
helpachieve
achieve
goals
goalsand
and
missions
missions
To
Tohelp
helpevaluate
evaluate
and
andreward
reward
decision
decisionmakers
makers

1-16

Characteristics of
Management Accounting
InformationTimeliness
Timeliness
AAMeans
Meansto
toan
an
End
End

Measures
Measuresof
of
Efficiency
Efficiencyand
and
Effectiveness
Effectiveness

Identify
Identify
Decision
DecisionMaker
Maker

Oriented
OrientedToward
Toward
Future
Future

1-17

Institutional Features
Generally Accepted Accounting Principles (GAAP)
Financial Accounting Standards Board
International Accounting Standards Board
Securities and Exchange Commission
Public Company Accounting Oversight Board
Audits of Financial Statements
Legislation

1-18

Professional Organizations
American Institute of Certified Public Accountants
Institute of Management Accountants
Institute of Internal Auditors
American Accounting Association
Committee of Sponsoring Organizations of the
Treadway Commission (COSO)

1-19

Competence, Judgment
and Ethical Behavior
Certified Public Accountant (CPA)
Certified Management Accountant (CMA)
Certified Internal Auditor (CIA)

Ethical behavior is the

cornerstone of the
accounting
profession.
1-20

Careers in Accounting
Public Accounting
Management Accounting
Governmental Accounting
Accounting Education

1-21

What About Bookkeeping?

Bookkeeping is the clerical side of accounting
the recording of routine transactions and day-today record keeping.

Professional accountants are involved more with

the interpretation and use of accounting
information than with its actual preparation.
1-22

Im Not An Accounting
Major
Accounting is the language of business,
and trying to run a business without
understanding accounting information is
analogous to trying to play sports without
understanding the rules.

1-23

Ethics, Fraud & Corporate

Governance
Corporate governance entails corporate
structures and processes for overseeing
the companys affairs to ensure that the
company is being managed with the best
interests of shareholders in mind.
Dennis Kozlowski, the former CEO
of Tyco, was sentenced to 8 1/3 to
25 years in prison for his
conviction for conspiracy,
securities fraud, and falsifying
records.
1-24

End of Chapter 1

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