Mapa conceptual ejercicio profesional

I. IMPORTANCE OF ACCOUNTING

Accounting

is the language of business, help people make better decisions.

Identifying means selecting transactions and events relevant

Communicating means preparing accounting reports

Recording means keeping a chronological log of transactions

Management Accounting

Provides information for decision-making activities of management WITHIN the business.

Financial Accounting

Is concerned with providing useful information to those parties OUTSIDE of the business.

Recordkeeping/Bookkeeping

Users of accounting information

External information users

Internal information users

are NOT directly involved in running the organization

Lenders (creditors)

- Loan money or other resources to an organization.

- They look for information to help them

Shareholders (investors)

- Owners of a corporation.

- Use accounting reports in deciding

Board of Directors

oversees stockholders interests in an organization

External (Independent) Auditors

Examine financial statements to verify that they are prepared.

Employees and Labor Unions

Use financial statements to judge the fairness of wages, assess job prospects, and bargain for better wages

Regulators

Often have legal authority over certain activities.

IRS who requires organizations to file accounting reports in computing taxes

Use accounting information to set utility rates.

Voters, Legislators, and Government Officials

Monitor and evaluate government receipts and expenses.

Contributors

Evaluate the use and impact of their donations

Suppliers

judge the soundness of a customer before making sales on credit.

Customers

reports to assess the staying power of potential suppliers

Research and Development Managers

Need information about projected costs and revenues of any proposed changes in products and services

are those directly involved in managing and operating an organization.

Purchasing Managers

Need to know what, when, and how much to purchase.

Human Resource Managers

Need information about employees’ payroll, benefits, performance, and compensation

Production Managers

Depend on information to monitor costs and ensure quality

Distribution Managers

Need reports for timely, accurate, and efficient delivery of products and services

Marketing Managers

Use reports about sales and costs to target consumers, set prices, and monitor consumer needs, tastes, and price concerns

Service Managers

Require information on the costs and benefits of looking after products and services

Opportunities in Accounting

We are influenced by accounting

- Private accounting

Public accounting

Government (and non-for-profit) agencies.

Accountants can possibly have great benefit packages

II. FUNDAMENTALS OF ACCOUNTING

Ethics—A Key Concept

Accepted standards of good and bad behavior

Beliefs that distinguish right from wrong

“Good ethics are good business”

Generally Accepted Accounting Principles (GAAP)

are rules that specify acceptable accounting practices

1. Setting Accounting Principles

a. Financial Accounting Standards Board (FASB)

b. Securities and Exchange Commission (SEC)

Private group that sets both broad and specific principles

Government group that establishes reporting requirements for companies that issue stock to the public

International Accounting Standards Board (IASB)

2. Principles and Assumptions of Accounting

General Principles: the basic assumptions, concepts, and guidelines for preparing financial statements

Specific Principles: detailed rules used in reporting business transactions and events

a. Accounting Principles

i. Cost Principle

Accounting information is based on actual cost

Objectivity: information is supported by independent, unbiased evidence; it demands more than a person’s opinion.

ii. Revenue Recognition Principle

Revenue (sales): is the amount received from selling products and services

Revenue Recognition Principle

Provides guidance on when a company must recognize revenue

Recognize: means to record it

iii. Matching Principle

iv. Full Disclosure Principle

A company must record its expenses incurred to generate the revenue reported.

Requires a company to report the details behind financial statements that would impact users’ decisions

b. Accounting Assumptions

i. Going-Concern Assumption

ii. Monetary Unit Assumption

iii. Time Period Assumption

Accounting information reflects a presumption that the business will continue operating instead of being closed or sold

We can express transactions and events in monetary, or money units

Presumes that the life of a company can be divided into time periods and that useful reports can be prepared for those periods

iv. Business Entity Assumption

Accounted for separately from other business entities, including its owner

v. Conservatism

By being conservative with the numbers

C. Sarbanes-Oxley (SOX)

It requires that the public companies apply other accounting oversight and stringent internal controls.

Congress passed this act to help curb financial abuses at companies that issue their stock to the public

Management and Auditors must verify the effectiveness of internal controls.

CHAPTER 1: INTRODUCING FINANCIAL ACCOUNTING