MGT100H1 Chapter Notes - Chapter 15: Profit Margin, Asset Turnover, Accounts Receivable
Chapter 15: Understanding Accounting and Financial Statements
●Accounting: the process of measuring, interpreting, and communicating financial
information to support internal and external business decision making
● Accounting professionals
○Public accountant: accountant who provides accounting services to other
organizations
■ Auditing or examining financial records
■ Tax preparation, planning, and related services
■ Management consulting
■ Forensic accountants: focus on uncovering potential fraud in many
different organizations
○Management accountant: accountant who is employed by a business other than
a public accounting firm
■ Collects and records financial transactions and prepares financial
statements used by the firm’s managers in decision making. Provide
timely, relevant, accurate, and concise information that executives can
use to operate their firms more effectively and more profitable than
without this input
■ Should be able to answer: where the company is going, what
opportunities are in the company’s future, if certain situations expose the
company to excessive risk, and if the firm’s information system provide
detailed and timely information to all levels of management
■ Often specialize in different aspects of accounting
■ Usually involved in the development and enforcement of organizational
policies on such items as employee travel
○Government and Not-for-Profit accountants
■ Concerned primarily with how efficiently the organizations work to meet
their objectives
● The foundation of the Accounting System
○Generally accepted accounting principles (GAAP): principles that outline the
conventions, rules, and procedures for deciding on the acceptable accounting
practices at a particular time
■ Consistency: all data should be collected and presented in the same
manner across all periods
■ Relevance: all information being reported should be appropriate and
assist users in evaluating financial information
■ Representational faithfulness: financial information should reflect the
substance of the economic activity during the reporting period
■ Reliability: the accounting data in financial statements are dependable
and can be verified by an independent party, such as an outside auditor
■ Timeliness: financial information should be made available within a time
period that allows the financial information to be useful in decision making
■ Understandability: requires that financial information be clearly presented
to users
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MGT100H1 Full Course Notes
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Document Summary
Accounting: the process of measuring, interpreting, and communicating financial information to support internal and external business decision making. Public accountant: accountant who provides accounting services to other organizations. Forensic accountants: focus on uncovering potential fraud in many different organizations. Management accountant: accountant who is employed by a business other than a public accounting firm. Collects and records financial transactions and prepares financial statements used by the firm"s managers in decision making. Provide timely, relevant, accurate, and concise information that executives can use to operate their firms more effectively and more profitable than without this input. Often specialize in different aspects of accounting. Usually involved in the development and enforcement of organizational policies on such items as employee travel. Concerned primarily with how efficiently the organizations work to meet. The foundation of the accounting system their objectives. Generally accepted accounting principles (gaap): principles that outline the conventions, rules, and procedures for deciding on the acceptable accounting practices at a particular time.
