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RSM100Y1 (287)

chapter 14 notes

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University of Toronto St. George
Rotman Commerce
Michael Szlachta

What Is Accounting? 1. Accounting: a comprehensive system for collecting, analyzing, and communicating financial information. o Data is transformed into information for decision making. 2. Bookkeeping: recording accounting transactions. 3. Accountants can determine how well a business is being managed and how financially strong it is. 4. 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. o Business Managers: use accounting info to set goals, develop plans, set budgets, and evaluate future prospects. o Employees and Unions: use accounting info to get paid and receive benefits and insurance. o Investors and Creditors: use accounting info to estimate returns and decide if a company is worth investing in. o Tax Authorities: use accounting info to plan for tax flows and to ensure correct amounts are paid on time. o Government Regulatory Agencies: rely in accounting info to fulfill their duties Ex. Require firms to disclose their financial information to potential investors. What Are Accountants and What Do They Do? 5. Controller: the individual who manages all the firms accounting activities. 6. Financial Accounting System: the process whereby interested groups are kept informed about the financial condition of a firm. o Interested groups include consumer groups, unions, shareholders, and govt agencies. o Focus on company as a whole, rather than individual departments or divisions. 7. Managerial (Management) Accounting: internal procedures that alert managers to problems and aid them in planning and decision making. o Serves internal users. o Used to set and monitor projects, departments, and activities. 8. Chartered Accountant (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. o Focus on external financial reporting. o Make sure the financial records are legit and it truly reflect the financial condition of the company.
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