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MGTA02H3 (136)
Lecture 4

week 4 notes

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Chapter 4 Understanding Accounting Issues Notes What is Accounting and Who Uses It? N accountinga comprehensive system for collecting, analyzing, and communicating financial information N bookkeepingrecording accounting transactions N accounting also uses performance measures to prepare performance reports for owners, the public, and regulatory agencies N accounting information system (AIS)an organized procedure for identifying, measuring, recording, and retaining financial information so that it can be used in accounting statements and management reports N there are numerous users of accounting information: o business managers use accounting information to set goals, develop plans, set budgets, and evaluate future prospects o employees and unions use accounting information to get paid and to plan for and receive such benefits as health care, insurance, vacation time, and retirement pay o investors and creditors use accounting information to estimate returns to stockholders, to determine a companys growth prospects, and to decide if the company is a good credit risk before investing or lending o taxing authorities use accounting information to plan for tax inflows, to determine the tax liabilities of individuals and businesses, and to ensure that correct amounts are paid in a timely fashion o government regulatory agencies rely on accounting information to fulfil their duties Who Are Accountants and What Do They Do? N controllerthe individual who manages all the firms accounting activities N as chief accounting officer, controller ensures that accounting system provides the reports and statements needed for planning, controlling, and decision-making activities Financial and Managerial Accounting Financial Accounting N financial accounting systemthe process whereby interested groups are kept informed about the financial condition of a firm N concerned with external usersconsumer groups, unions, shareholders, and government agencies N it prepares and publishes income statements and balance sheets at regular intervals Managerial Accounting N managerial accountinginternal procedures that alert managers to problems and aid them in planning and decision making N managers at all levels need information (as well as other employees) to make decisions for their departments, t
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