Chapter 4-Understanding Accounting Issues

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14 Aug 2010
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Chapter 4 Understanding Accounting Issues
Accounting - A comprehensive system for collecting, analyzing, and communicating financial information
Bookkeeping - Recording accounting transactions
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
People who use accounting information:
- Business Managers - to set goals, develop plans, set budgets, and evaluate future prospects
- Employees and unions - to get paid and plan for and receive benefits
- Investors and creditors - estimate returns to stockholders
- Taxing Authorities - plan for tax inflows, to determine tax liabilities of individuals and businesses
- Government Regulatory Agencies - to fulfill their duties; the provincial securities commissions
Controller - The individual who manages all the firm's accounting activities
Financial and Managerial Accounting
Financial Accounting
Financial Accounting System - The process whereby interested groups are kept informed about the financial
condition of a firm
- consumer groups, unions, shareholders, government agencies
- Prepares and publishes income statements, and balance sheets at regular intervals
- focuses on the activities of the company as a whole
- Information in the reports are historical; summarized financial transaction that occurred
Managerial Accounting
Managerial (Management) Accounting - Internal procedures that alert managers to problems and aid them in
planning and decision making
- serves internal users, company's individual units
- and used as projections and forecasts of both financial data and business activities
Professional Accountants
Chartered Accountants (CA)
- An individual who has met certain experience and education requirements and has passed a licensing
examination; acts as an outside accountant for other firms
Certified General Accountants (CGA)
- An individual who has completed an education program and passed a national exam; works in private industry
or a CGA firm
Certified Management Accountants (CMA)
- An individual who has completed a university degree, passed a national examination, and completed a strategic
leadership program; works in industry and focuses on internal management and accounting
Accounting Services
Auditing
Audit - An accountant's examination of a company's financial records to determine if it used proper procedures to
prepare its financial reports
Forensic Accountant - an accountant who tracks down hidden funds in business firms, usually as part of a criminal
investigation
Generally Accepted Accounting Principles (GAAP) - Standard rules and methods used by accountants in preparing
financial reports
Management Consulting Services
Management Consulting Services - Specialized accounting services to help managers resolve a variety of problems in
finance, production scheduling, and other areas
Private Accountants
Private Accountants - An accountant hired as a salaried employee to deal with a company's day-to-day accounting
needs
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