Class Notes (811,179)
Canada (494,542)
MGTA02H3 (136)

Introduction to Management II - Lecture 004

4 Pages
Unlock Document

University of Toronto Scarborough
Management (MGT)
Chris Bovaird

31 January 2013 CHAPTER 4: UNDERSTANDING ACCOUNTING ISSUES WHAT IS ACCOUNTING AND WHO USES IT Accounting is a comprehensive system for collecting, analyzing, and communicating financial information. Its purpose is to measure a business’ performance through sales, expenses, profit, losses and taxes. This then translate this information so managers (and others) can make decisions. Book Keeping is the act of recording accounting transactions. Because businesses engage in many thousands of transactions, ensuring consistent, dependable financial information is mandatory. Accounting Information System (AIS) is an organized procedure for identifying, measuring, recording, and retaining financial information so that it can be used in accounting statements and management reports. Users of accounting information include:  Business Managers who use accounting information to set goals, develop plans, set budgets, and evaluate future prospects (IE: Directors, shareholders)  Employees and Unions who use accounting information to get paid and to plan for and receive benefits (IE: Health care, insurance, vacation time, retirement pay)  Investors and Creditors use accounting information to estimate returns to stockholders, to determine a company’s growth prospects, and to decide if the company is a good credit risk before investing or lending (IE: Bankers)  Taxing Authorities use accounting information to plan for tax inflows, to determine the tax liabilities of individuals and businesses, and ensure that correct amounts are paid timely  Government Regulatory Agencies rely on accounting information to fulfill their duties (IE: The provincial securities commissions require firms to file financial disclosures so that potential investors have valid information about a company’s financial status) WHO ARE ACCOUNTANTS AND WHAT DO THEY DO Controller is the individual who manages all the firms accounting activities; they are the head of the AIS as the chief accounting officer. Financial Accounting System is the process whereby interested groups are kept informed about the financial condition of a firm concerned with external users of information (IE: Consumer groups, unions, shareholders, government agencies). These documents focus on the activities of the company as a whole rather than on individual departments or divisions. Historical Reports summarize financial transactions that have occurred during past accounting periods. Managerial Accounting is internal procedures that alert managers to problems and aid them in planning and decisions making concerned with internal users of these documents are used to project and forecast business activities and are forward looking rather than historical. Professional Accountants  Chartered Accountants (CA) are an individual who have met certain experience and education requirements and has passed a licensing examination. They act as an outside accountant for other firms.  Certified General Accountant (CGA) is individuals who has completed an education program and passed a national exam. They work in private industries or a CGA firm  Certified Management Accountant (CMA) is individuals who has completed a university degree, passed a national examination and completed a strategic leadership program. They work in industries and focuses on internal management accounting Accounting Services  Auditing o Audit is an accountant’s examination of a company’s financial records to determine if it used proper procedures to prepare its financial reports. Companies must provide audited financial reports when applying for loans or selling stock o Forensic Accountant is an accountant who tracks down hidden funds in business firms, usually as part of a criminal investigation, detecting frauds o Generally Accepted Accounting Principles (GAAP) is standard rules and methods used by accountants in preparing financial reports  Tax Services include helping clients prepare their tax returns and tax planning  Management Consulting Services are specialized accounting services to help managers resolve a variety of problems in finance, production scheduling, and other areas Private Accountants are accountants hired as a salaried employee to deal with a company’s day-to-day accounting needs. TOOLS OF THE ACCOUNTING TRADE All accountants, whether public or private, rely on record keeping. The two key concepts of accounting include accounting equation and double-entry booking. ASSETS = LIABILITIES + OWNER’S EQUITY Double-Entry Accounting System is bookkeeping systems that require every transaction to be entered in two ways, how it affects assets and how it affects liabilities and owner’s equity so that the accounting equation is always in balance. Financial Statements are any of several types of broad reports regarding a company’s financial status; most often used in reference to balance sheets, income statements and cash flows.  Balance Sheets are a type of financial statement that summarizes a firm’s financial position on a particular date in terms of its assets, liabilities, and owner’s equity o Assets are anything of economic value owned by a firm or individual.  Current Assets are cash and other assets that can be converted into cash within a year  Liquidity is the ease and speed with which an asset can be converted to cash; cash is said to be perfectly liquid  Accounts Receivable are amounts due to the firm from customers who have purchased goods or services on credit  Merchandise Inventory are the cost of merchandise that has been acquired for sale to customers but is still on hand
More Less

Related notes for MGTA02H3

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.