Accounting

Accounting

1. Process of analyzing and drawing conclusions from the recordkeeping*

   • *Recording of transactions and events of an organization´s day-to-day activities
   • • Users of accounting
       • External
         • Not directly involved
           • Board of directors
             • Oversees stockholders interests
           • Employees & labor unions
             • To judge the fairness of wages, job prospects ...
           • Voters, legislators and government officials
             • To monitor/evaluate government receipts and expenses
           • Contributors
             • To evaluate use/impact of their donations
           • Customers
             • To assess the staying power of potential suppliers
           • Suppliers
             • To judge the soundness of a customer
           • Regulators
             • Legal authority
               • Computing taxes
               • To set utility rates
           • External auditors
             • To verify the GAAP
           • Lenders (creditors)
             • Loan money
               • To know if it is likely to repay with interest
           • Shareholders (investors)
             • Owners
               • To decide whether to buy,hold or sell
       • Internal
         • Directly involved in managing/operating an organization
           • Research&development M
             • Info about projected costs/revenues of proposed changes
           • Purchasing M
             • What, When, How to purchase
           • Human resource M
             • Info about employees´s
           • Production M
             • Info to monitor costs and ensure quality
           • Distribution M
             • Reports for timely,accurate & efficient delivery
           • Marketing M
             • Use reports about sales/costs to target consumers,set prices...
           • Service M
             • Info on the costs/benefits
     • Opportunities of accounting
       • Private
       • They can help with
         • Financial analysis
         • Strategic planning
         • e-commerce
         • Product feasibility
         • Info technology
         • Financial management
       • Public
       • Government
         • Non-profit
       • Accounting specialists
         • Certified public accountant
         • Certified payroll professional
         • Personal financial specialist
         • Certified fraud examiner
         • Certified forensic accountant
     • Fundamentals of accounting
       • Ethics
         • Distinguish right from wrong
           • Provide useful info for decisions
       • GAAP
         • Setting accounting principles
           • Financial accounting standards board FASB
             • Sets broad/specific principles
           • Securities and exchange commission SEC
             • Establishes requirements for companies that issue stock to the public
           • International accounting standards board LASB
             • Issues international reporting standards
         • Principles and assumptions
           • Accounting principles
             • Cost P
               • Is based on actual cost
                 • Objectivity
                   • Info supported by independent, unbiased evidence
             • Revenue recognition P
               • Amount received from selling products
                 • Recognize=Record
                   • When earned
                   • Not in cash
                   • Cash received + cash value of any other item received
             • Matching P
               • Record the expenses
                 • Generate the revenue reported
             • Full disclosure P
               • Report details behind financial statements
           • Accounting assumptions
             • Going-concern
               • Accounting info = the business will continue operating
             • Monetary unit
               • Money most common denominator in business
             • Time period
               • The life of a company can be divided in time periods
             • Business entity
               • Separate info for each business
             • Conservatism
               • Numbers
       • SOX
         • Help curb financial abuses at companies that issue their stock to the public
           • Failure to comply
             • Financial penalties
             • Stock market delisting
             • Criminal prosecution of executives
   • Identifying
     • Selecting relevant transactions/events
   • Recording
     • Chronological log of transactions/events
   • Communicating
     • Preparing accounting reports

2. Management accounting

   • Info for decision-making WITHIN the business

3. Financial accounting

   • Info for decision-making OUTSIDE the business

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