MGTA04 Class 5 & 6 February 9/16, 2012
CHAPTER 4: UNDERSTANDING ACCOUNTING ISSUES
ACCOUNTING
- A comprehensive system for collecting, analyzing, and communicating financial information
- Bookkeeping: recording accounting transactions
- Accounting Information Systems (AIS): an organized procedure for identifying, measuring, recording,
and retaining financial information so that it can be used in accounting statements and management
reports
- Users of Accounting Info:
- Business managers use acctg info to set goals, develop plans, set budgets, and evaluate future prospects
- Employees and unions use acctg info to paid and to plan for and receive such benefits (ex. Health care,
insurance, vacation time, and retirement pay)
- Investors and Creditors: to estimate returns to stockholders, to determine a company’s growth prospects,
and to decide if the company is a good credit risk before investing or lending
- Taxing authorities: plan for tax inflows, to determine tax liabilities of individuals and businesses, and to
ensure that correct amounts are paid in a timely fashion
- Government regulatory agencies: fulfill their duties, the provincial securities commissions—require
firms to file financial disclosures so that potential investors have valid info about a company’s financial
status
ACCOUNTANTS AND WHAT THEY DO
- At the head of the AIS is the controller, who manages all the firm’s accounting activities
- Two main fields of acctg: financial and managerial
- Financial Accounting system: the process whereby interested groups are kept informed about the financial
condition of a firm. [ External Users ]
- Documents focus on the activities of the company as a whole, rather than on individual departments or
divisions.
- Information in such reports are mostly historical: summarizes financial transactions that have occurred
during past acctg periods
- Managerial Accounting: internal procedures that alert managers to problems and aid them in planning and
decision making. [Internal Users]
- Reports to these users serve the company’s individual units, whether departments, projects, plants, or
divisions.
- Can be designed in any form that will assist internal users in planning, decision making, and controlling
- Projections and Forecasts of both financial data and business activities, internal reports are an extremely
important part of the management acctg system: they are forward looking rather than historical in nature
PROFESSIONAL ACCOUNTANTS
- CA (Chartered Accountant): an individual who has met certain experience and education requirements
and has passed a licensing exam; acts as an outside accountant to other firms
- CA firms typically provide audit, tax and mgt services. They focus on external financial reporting
- CGA (Certified General Accountants): an individual who has completed an education program and
passed a national exam; works in private industry or a CGA firm
- CGAs can no audit corporate financial statements in most provinces. CGAs focus on external financial
reporting, and emphasize the use of the computer as a management acctg tool
- CMA (Certified Management Accountant): a person who has completed a university degree, passed a
national exam, and completed a strategic leadership program; works in industry and focuses on internal
management acctg
- CMAs bring a strong market focus to strategic mgt and resource development, synthesizing and
analyzing financial and non-financial information to help organizations maintain a competitive advantage
PRIVATE ACCOUNTANTS
- An accountant hired as a salaried employee to deal with a company’s day to day acctg needs