UGBA 10 Lecture Notes - Lecture 3: Financial Statement, Bookkeeping, Financial Accounting
23 May 2018
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What is Accounting? January 27
I. What is accounting?
• Accounting: comprehensive system for collecting, analyzing, and communicating
financial information; accounting is useful for decision makers.
• Bookkeeping: recording of accounting transactions.
o Difference is that accounting is more skilled and requiring of judgment.
• Taking the bookkeeping records into financial statements.
• Who needs the info?
o Users of financial statements are the decision-makers inside (managers) and
outside the firm (investors, government, unions/workforce).
II. Managerial accounting
• Managerial accounting: use of accounting information within the company; makes day-
to-day decisions about specific products and detailed information.
• Financial accounting: use of accounting information by outside players.
o External decision-makers have access to limit amounts of financial statements to
prevent data overload to protect details that would be useful to competitors.
Some information is kept confidential to protect details useful to competitors.
III. What do external users get?
• Income statements
• Balance sheet
• Statement of cash flows
• Stateet of stokholdes’ euit
IV. Financial statements
• Financial statements are the management’s legal esposiilit, ot the aoutat’s.
Stateets ust e pepaed ude the dietio of the opa’s aageet.
V. Type of accountants
• Piate: do’t offe thei seies to the puli; ok ithi a opoatio.
• Management: more skilled in assisting management in decision-making.
• CPA (state level requirement): public accountant that is licensed by the state; only
idepedet CPA’s a pefo audits CPA’s i a opa aot patie ithi the
company because of the conflict of interest).
o Audit: looks at the opa’s fiaial stateets to ake sue it is i
accordance with the GAAP (rules).
o Every company has to be audited.
VI. Accounting equation: Assets= liailities + owes’ euity (parts of the balance sheet)
o Asset: can be tangible (cash, inventory) or intangible (intellectual property)
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Document Summary
Some information is kept confidential to protect details useful to competitors. Income statements: balance sheet, statement of cash flows, state(cid:373)e(cid:374)t of sto(cid:272)kholde(cid:396)s" e(cid:395)uit(cid:455) Financial statements: financial statements are the management"s legal (cid:396)espo(cid:374)si(cid:271)ilit(cid:455), (cid:374)ot the a(cid:272)(cid:272)ou(cid:374)ta(cid:374)t"s. Statement of cash flows: financial statement that shows cash receipts (cash flow from earnings) and cash payments (cash flows to buy new assets) Earnings is not the same as cash: revenues: flows of value from selling goods and services, revenues are recorded when, goods are supplied/delivered to the customer, not when the customer pays, ex. 1: company performs consulting services in january, but agrees to be paid at the end of the quarter; it is revenue in january, not in march. The flow of value is a receivable: e(cid:454). 2: google"s ads a(cid:396)e (cid:271)ased o(cid:374) (cid:272)(cid:396)edit ea(cid:396)(cid:374)i(cid:374)gs (cid:894)paid (cid:449)ithi(cid:374) 60 da(cid:455)s(cid:895), so it is (cid:272)o(cid:374)side(cid:396)ed (cid:396)e(cid:448)e(cid:374)ue e(cid:448)e(cid:374) if it is(cid:374)"t paid (cid:455)et at that (cid:373)o(cid:373)e(cid:374)t.
