Chapter 16 Notes 1
Understanding Accounting and Financial Information
The Importance of Accounting and Financial Information:
Accounting System: the inputs to an accounting system include sales documents and other
records. The data are recorded, classified, and summarized. They’re then put into summary
financial statements such as the income statement and the balance sheet. (pg 249)
Areas of Accounting:
Managerial accounting is used to provide information and analyses to managers within the
organization to assist them in decision-making. They answer questions like how quickly is the firm
selling what it buys and which expenses change with changes in revenue?
Financial accounting is accounting information and analyses prepared for people outside the
organization. They answer questions like should we lend money to this company and will it be able
to pay it back?
Private accountants work for a single firm, government agency, or non-profit organization.
Public accountants provide their services to individuals or businesses on a fee basis. They
provide services like accounting, compliance, and offer professional advice.
Forensic accounting is a new area of accounting that focuses its attention on fraudulent
Compliance is the job of reviewing and evaluating the records used to prepare a company’s
financial statements. Private accountants within the organization often perform internal audits