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RSM100Y1 (431)
Chapter 14

chapter 14

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University of Toronto St. George
Rotman Commerce
Stojanovic Dragan

CHAPTER 14 UNDERSTANDING ACCOUNTING ISSUESWHAT IS ACCOUNTING y Accounting a comprehensive system for collecting analyzing and communicating financial informationrecording accounting transactions is just one phase of accounting y Bookkeepingy Accounting also uses performance measures to prepare performance reports for owners the public and regulatory agencies y To meet these objectives accountants keep records of such transactions as taxes paid income received and expenses incurred and they analyze the effects of these transactions on particular business activities y By sorting analyzing and recording thousands of transactions accountants can determine how well a business is being managed and how financially strong it is y 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 y The system includes all the people reports computers procedures and resources for compiling financial transactions y There are numerous users of accounting informationBusiness managers use accounting information to set goals develop plans set budgets and evaluate future prospectsEmployees and unions use accounting information to get paid and to plan for and receive such benefits as health care insurance vacation time and retirement payInvestors and creditors use accounting information to estimate returns to stockholders to determine a companys growth prospective and to decide if they should invest or notTax authorities use it to plan for tax inflows to determine the tax liabilities of individuals and businesses and to ensure that correct amounts are paid in a timely fashionGovernment regulatory agencies use it to fulfill their duties WHO ARE ACCOUNTANTS AND WHAT DO THEY DO y At the head of the AIS is the controllerthe individual who manages all the firms accounting activities y As chief accounting officer the controller ensures that the accounting system provides the reports and statements needed for planning controlling and decisionmaking activities y There are two main fields of accounting financial and managerial Financial and Managerial Accounting y They serve different users in and outside the company
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