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Chapter 11

MGMT 1000 Chapter Notes - Chapter 11: Investment, Project Manager, Financial Ratio


Department
Management
Course Code
MGMT 1000
Professor
Kathleen Rodenburg
Chapter
11

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WHAT IS ACCOUNTING AND WHO USES ACCOUNTING INFORMATION?
Accounting: A comprehensive system for collecting, analyzing, and communicating financial
information
Book Keeping: Recording accounting transactions
Accounting Information System (AIS): organized procedure for identifying, measuring,
recording, and retaining financial information for use in accounting statements and management
reports
Users of Accounting Information:
- Business Managers:
use to set goals, develop plans, set bidgets, evaluate future prospects
- Employees and Unions:
to get paid, plan for a receive benefits (health care, insurance,
vacation time, retirement pay)
- Investors and Creditors:
to estimate returns to stockholders, determine a company’s
growth prospects, determine whether it is a good credit risk before investing or lending
- Tax Authorities:
to plan for tax inflow, determine the tax liabilities of individuals and
businesses and ensure that the correct amounts are paid on time
- Government Regulatory:
Provincial securities regulators (example: 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 (chief accounting officer): The individual who manages all the firm’s accounting
activities
Two Main Fields of Accounting
How to Distinguish: Users they serve
Financial
- The process whereby interested groups are kept informed about the financial
condition of a firm
- Concerned with External
users (consumers, unions, government agencies,
stockholders)
- Income statements and balance sheets
- Focus on company as a whole, rather than individual departments
Managerial (or Management Accounting)
Internal procedures that alert managers to problems and aid them in planning and decision
making
- Professional Accountants:
- Three Accounting Organizations in Canada:
- Chartered Accountant (CA)

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- 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 Management Accountant (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
accounting
- Certified General Accountant (CGA)
- An individual who has completed an education program and
passed a national exam; works in private industry or a CGA firm
- Chartered Professional Accountants (CPA):
The banner (designation) that is being
used to unify the accounting profession in Canada
- Accounting Services:
-Auditing
:
- An account’s examination of a company’s financial records to determine if
it used proper procedures to prepare its financial reports
- GAAP (Generally Accepted Accounting Principles):
Standard rules and
methods used by accountants in preparing financial reports
- Detecting Fraud:
- Forensic Accountant: Accountants who track down hidden
funds in business firms
- Tax Services:
- Helping clients preparing tax returns and tax planning
- Private Accountants
- An accountant hired as a salaried employee to deal with a company’s day-to-day
accounting needs
- The Accounting Cycle:
THE ACCOUNTING EQUATION
- To balance data pertaining to financial transactions
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