Chapter 4 Study Guide

5 views11 pages
24 Mar 2011
Chapter 4: Understanding Accounting Issues
What is accounting and who uses it?
-accounting: a comprehensive system for collecting, analyzing, and communicating financial
-measures business performance; measures are converted into information for management
-bookkeeping: recording accounting transactions
-uses performance measures to prepare performance reports for owners, the public, and
regulatory agencies
-keep records of taxes paid, income received, and expenses
-they analyze the effects of these transactions on business activities
-analyzing and sorting transactions can help determine how well a business is being managed
and how financially strong it is
-accounting system can provide distorted results which can cause problems for owners and
-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
-includes all the people, reports, computers, procedures, and resources for obeying financial
-The below users use accounting for various reasons:
(1) Business managers: to set goals, develop plans, set budgets, and evaluate future
(2) Employees and unions: to get paid, to plan for and receive such benefits such as health
growth prospects, to decide if a company is a good credit risk before investing or lending
(4) Taxing authorities: to plan for tax inflows, determine tax liabilities of individuals and
businesses, to ensure correct amounts are paid on time
(5) Government regulatory: to fulfil their duties, requires firms to file financial disclosures
Who are accountants and what do they do?
-the head of the AIS is the controller
-ensures that the AS provides the reports and statements needed for planning
-the two main fields of accounting are financial and managerial
Unlock document

This preview shows pages 1-3 of the document.
Unlock all 11 pages and 3 million more documents.

Already have an account? Log in
Financial and managerial accounting
-two fields of accounting: financial and managerial
-can be distinguished by the different users they serve
-users of accounting information can be classified as users outside the company and users inside
the company
-this allows us to categorize accounting systems as either financial or managerial
Financial Accounting
-financial accounting system: the process whereby interested groups are kept informed about the
financial condition of a firm
-concerned with external users of information---consumer groups, unions, shareholders,
government agencies
-prepares and publishes income statements and balance sheets
-these documents focus on the activities as a whole rather than on individual departments
-must conform to standard reporting formats imposed by government agencies and accounting
-information in such reports is mostly historical
-reports summarize financial transactions that have occurring during past accounting periods
Managerial Accounting
-managerial accounting: internal procedures that alert managers to problems and aid them in
planning and decision making
-managers need information to make decisions for the departments, to monitor current projects
and to plan for future projects
-this information can be these to negotiate material costs with suppliers
-internal reports are designed in any form, which helps internal users in planning, decision
making, and controlling
-internal reports are very important part of the management accounting system
-they are forward looking rather than historical looking
Professional Accountants
-have a high level of expertise and credibility
-three professional accounting organizations have developed in Canada to certify accounting
Chartered Accountants
-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
Unlock document

This preview shows pages 1-3 of the document.
Unlock all 11 pages and 3 million more documents.

Already have an account? Log in
-a person must earn a university degree
-then, completed an educational program and passed a national exam
-half of all CAs work in CA firms that offer accounting services to the public
-the other of CAs work in government or industry
-provide audit, tax, and management services
-focus on external financial reports
-certifying for interested parties such as shareholders, lenders, revenue agency that the financial
records of a company matches the actual financial condition of the firm
Certified General Accountants
-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
-a person must complete an education program and pass a national exam
-to be eligible, a person must have an accounting job with a company
-nowadays CGAs can audit corporate financial statements in most provinces
-work in private companies, but there are a few CGA firms
-also work in CA firms
-focus on external financial reporting
-uses computer as a management accounting tool
-commission reports on issues like pensions
Certified Management Accountants
-certified management accountant (CMA): an individual who has completed a university degree,
passed a national exam, and completed a strategic leadership program
-works in industry and focuses on internal management accounting
-the national exam is two parts
-work in organizations of all sizes
-focuses on applying best management practices in all the operations of a business
-bring a strong market-focus to strategic management and resource development
-analyzes financial and non financial information to help organizations maintain a competitive
-emphasize the role of accountants in the planning and overall strategy of the firm in which they
Accounting Services
-CAs and CGAs perform accounting services such as auditing, tax services, and management
Unlock document

This preview shows pages 1-3 of the document.
Unlock all 11 pages and 3 million more documents.

Already have an account? Log in

Get OneClass Notes+

Unlimited access to class notes and textbook notes.

YearlyBest Value
75% OFF
$8 USD/m
$30 USD/m
You will be charged $96 USD upfront and auto renewed at the end of each cycle. You may cancel anytime under Payment Settings. For more information, see our Terms and Privacy.
Payments are encrypted using 256-bit SSL. Powered by Stripe.