CHAPTER 1 (WILD)

⮚ Shareholders (investors) are the owners of a

ACCOUNTING IN BUSINESS corporation. They use accounting reports in
deciding whether to buy, hold, or sell stock
IMPORTANCE OF ACCOUNTING
⮚ Directors are typically elected to a board of
Accounting is an information and measurement system directors to oversee their interests in an
that identifies, records, and communicates relevant, organization
reliable, and comparable information about an ⮚ External (independent) auditors examine
organization’s business activities financial statements to verify that they are
prepared according to generally accepted
⮚ Identifying – requires that we select relevant
accounting principles
transactions and events
⮚ Nonexecutive employees and labor unions use
⮚ Recording – requires that we keep a financial statements to judge the fairness of
chronological log of transactions and events wages, assess job prospects, and bargain for
measured in dollars better wages

⮚ Communicating – requires that we prepare ⮚ Regulators often have legal authority over
accounting reports such as financial statements, certain activities of organizations
which we analyze and interpret ⮚ Voters, legislators, and government officials use
Recordkeeping/ bookkeeping is the recording of accounting information to monitor and evaluate
transactions and events, either manually or government receipts and expenses
electronically ⮚ Contributors to nonprofit organizations use
accounting information to evaluate the use and
● Technology is only as useful as the accounting impact of their donations
data available, and users’ decisions are only as
good as their understanding of accounting ⮚ Suppliers use accounting information to judge
the soundness of a customer before making
Users of Accounting Information
sales on credit
Accounting is called the language of business because ⮚ Customers use financial reports to assess the
all organizations set up an accounting information
system to communicate data to help people make staying power of potential suppliers
better decisions ● Financial Accounting is the area of accounting
aimed at serving external users by providing
External Information Users - are not directly involved in them with general-purpose financial statements
running the organization ● General-purpose refers to the broad range of
purposes for which external users rely on these
- have limited access to an organization’s
statements
information
- their business decisions depend on information Internal Information Users - are those directly involved
that is reliable, relevant, and comparable in managing and operating an organization
- includes shareholders (investors), lenders
(creditors), directors, customers, suppliers, - they use the information to help improve the
regulators, lawyers, brokers, external auditors, efficiency and effectiveness of an organization
and the press - includes chief executive officer (CEO), chief
financial officer (CFO), chief audit executive
⮚ Lenders (creditors) loan money or other (CAE), treasurer, and other executive and
resources to an organization, look for managerial-level employees
information to help them assess whether an ⮚ Research and development managers need
organization is likely to repay its loans with
interest information about projected costs and revenues
 of any proposed changes in products and - Steps in making ethical decisions: (1) identify
services ethical concerns – use personal ethics to
recognize an ethical concern, (2) analyze options
⮚ Purchasing managers need to know what,
– consider all good and bad consequences, (3)
when, and how much to purchase make ethical decision – choose best option after
⮚ Human resource managers need information weighing all consequences
about employees’ payroll, benefits, ● Accountants face many ethical choices as they
performance, and compensation prepare financial reports. Good ethics are good
⮚ Production managers depend on information to business
monitor costs and ensure quality
⮚ Distribution managers need reports for timely, Fraud Triangle is a model created by a criminologist that
accurate, and efficient delivery of products and asserts the following three factors must exist for a
services person to commit fraud
⮚ Marketing managers use reports about sales
⮚ Opportunity. A person must envision a way to
and costs to target consumers, set prices, and
commit fraud with a low perceived risk of
monitor consumer needs, tastes, and price
getting caught. Employers can directly reduce
concerns
this risk. An example of some control on
⮚ Service managers require information on the opportunity is a pre-employment background
costs and benefits of looking after products and check.
services ⮚ Pressure, or incentive. A person must have
● Managerial Accounting is the area of accounting
some pressure to commit fraud. Examples are
that serves the decision-making needs of
unpaid bills and addictions.
internal users
● Internal reports are not subject to the same ⮚ Rationalization, or attitude. A person who
rules as external reports and instead are rationalizes fails to see the criminal nature of
designed with the special needs of internal the fraud or justifies the action.
users in mind ● Both internal and external users rely on internal
controls to reduce the likelihood of fraud
Opportunities in Accounting
● Internal controls are procedures set up to
Accounting has four broad areas of opportunities: protect company property and equipment,
financial, managerial, taxation, and accounting-related ensure reliable accounting reports, promote
efficiency, and encourage adherence to
● Private Accounting (58%) - majority of
company policies
opportunities, are employees working for
businesses Generally Accepted Accounting Principles (GAAP) -
● Public Accounting (23%) - offers the next largest financial accounting is governed by these concepts and
number of opportunities, which involve services rules
such as auditing and tax advice
- GAAP aims to make information relevant,
● Government and not-for-profit agencies (19%) -
reliable, and comparable
including business regulation and investigation
of law violations Securities and Exchange Commission (SEC) - a
● Certified public accountants (CPAs) must meet government agency, has the legal authority to set GAAP
education and experience requirements, pass
an examination, and exhibit ethical character - oversees proper use of GAAP by companies that
raise money from the public through issuances
FUNDAMENTALS OF ACCOUNTING of their stock and debt
- has largely delegated the task of setting U.S.
Ethics - are beliefs that distinguish right from wrong,
GAAP to the Financial Accounting Standards
they are accepted standards of good and bad behaviour
Board (FASB)
Financial Accounting Standards Board (FASB) - a ● Objectivity means that information is supported
private-sector group that sets both broad and specific by independent, unbiased evidence; it demands
principles more than a person’s opinion
● Revenue Recognition Principle - provides
International Accounting Standards Board (IASB) an
guidance on when a company must recognize
independent group (consisting of individuals from many
revenue; recognize revenue when it is
countries), issues International Financial Reporting
performed
Standards (IFRS) that identify preferred accounting
● Expense Recognition/ Matching Principle -
practices
prescribes that a company record the expenses
- More than 115 countries now require or permit it incurred (must be recorded when they occur)
companies to prepare financial reports to generate the revenue reported
following IFRS ● Full Disclosure Principle - prescribes that a
company report the details behind financial
workiiConceptual Framework and Convergence statements that would impact users’ decisions
The FASB and IASB are attempting to converge and
enhance the conceptual framework that guides
standard setting. The FASB framework consists broadly Accounting Assumptions
of the following:
● Going-concern Assumption - the business will
continue operating instead of being closed or
⮚ Objectives — to provide information useful to
sold
investors, creditors, and others ● Monetary Unit Assumption - we can express
⮚ Qualitative Characteristics — to require transactions and events in monetary, or money,
information that is relevant, reliable, and units
comparable ● Time Period Assumption - the life of a company
⮚ Elements — to define items that financial can be divided into time periods, and that useful
statements can contain reports can be prepared for those periods
⮚ Recognition and Measurement — to set criteria ● Business Entity Assumption - a business is
accounted for separately from other business
that an item must meet for it to be recognized
entities, including its owner
as an element; and how to measure that
element ⮚ Sole Proprietorship - is a business owned by one

Principles and Assumptions of Accounting person

⮚ Partnership - is a business owned by two or
⮚ General Principles are the basic assumptions,
concepts, and guidelines for preparing financial more people, called partners, which are jointly
statements; stem from long-used accounting liable for tax and other obligations
practices ⮚ C Corporation – is a business legally separate
⮚ Specific Principles are detailed rules used in from its owner/s, meaning it is responsible for
reporting business transactions and events; its own acts and its own debts
arise more often from the rulings of ⮚ S Corporation - a corporation with special
authoritative groups
attributes, does not owe corporate income tax;
Accounting Priniciples report their share of corporate income with
their personal income
● Measurement (Cost/ Historical Cost) Principle – ● Ownership of all corporations is divided into
accounting information is based on actual cost, units called shares or stock. When a
emphasizes reliability and verifiability, and corporation issues only one class of stock,
information based on cost is considered we call it common stock (or capital stock)
objective
 ⮚ Owner, Withdrawals – are outflows of resources
⮚ Proprietorships and partnerships are usually
such as cash and other assets that an owner
managed by their owners. In a corporation, the takes from the company for personal use
owners (shareholders) elect a board of directors
who appoint managers to run the business ⮚ Revenues increase equity (via net income) from
sales of products and services to customers
Accounting Constraints
⮚ Expenses decrease equity (via net income) from
● Materiality prescribes that only information that costs of providing products and services to
would influence the decisions of a reasonable customers
person needs to be disclosed. This constraint ● Net income occurs when revenues exceed
looks at both the importance and relative size of expenses. Net income increases equity. A net
an amount. Kung ano yung mas convenient loss occurs when expenses exceed revenues,
● Cost-benefit prescribes that only information which decreases equity
with benefits of disclosure greater than the
Expanded Accounting Equation
costs of providing it needs to be disclosed

Sarbanes-Oxley (SOX) - requires that these public

companies apply both accounting oversight and
stringent (strict) internal controls
TRANSACTION ANALYSIS

External Transactions – are exchanges of value between

Governance systems – set up to reduce the risk of two entities, which yield changes in the accounting
accounting fraud and increase confidence in accounting equation
reports
Internal transactions – are exchanges within an entity,
TRANSACTION ANALYSIS AND THE ACCOUNTING which may or may not affect the accounting equation
EQUATION
● Events refer to happenings that affect the
Assets are resources a company owns or controls, are accounting equation and are reliably measured
expected to yield future benefits ● Assets always equal the sum of liabilities and
equity
● Receivable is used to refer to an asset that
promises a future inflow of resources Basic types of company operations: (1) Services
—providing customer services for profit, (2)
Liabilities are creditors’ claims on assets, these claims
Merchandisers — buying products and reselling them
reflect company obligations to provide assets, products,
for profit, and (3) Manufacturers — creating products
or services to others
and selling them for profit
● Payable refers to a liability that promises a
Financial Statements
future outflow of resources

Equity is the owner’s claim on assets, and is equal to ⮚ Income Statement – describes a company’s
assets minus liabilities. This is the reason equity is also revenues and expenses along with the resulting
called net assets or residual equity. net income or loss over a period of time due to
earnings activities
● Equity increases from owner investments and
⮚ Statement of Owner’s Equity/ Statement of
revenues. It decreases from owner withdrawals
Changes in Equity – explains changes in equity
and expenses. Equity consists of four elements:
from net income (or loss) and from any owner
⮚ Owner, Capital – Owner investments are inflows
investments and withdrawals over a period of
of resources such as cash and other net assets
time; Ending capital is computed in this
that an owner puts into the company
statement and is carried over and reported on
the balance sheet
 ⮚ Balance Sheet – describes a company’s financial
⮚ Operating Activities – involve using resources to
position (types and amounts of assets,
liabilities, and equity) at a point in time research, develop, purchase, produce,
⮚ Statement of Cash Flows – identifies cash distribute, and market products and services
inflows (receipts) and cash outflows (payments) ● Strategic management is the process of
over a period of time determining the right mix of operating
● The income statement, the statement of activities for the type of organization, its
owner’s equity, and the statement of cash flows plans, and its market
are prepared for a period of time. The balance ⮚ Investing Activities – are the acquiring and
sheet is prepared as of a point in time disposing of resources (assets) that an
organization uses to acquire and sell its
products or services
NOTES: ⮚ Financing Activities – provide the means

● IFRS does require certain minimum line items be organizations use to pay for resources such as
reported in the balance sheet along with other land, buildings, and equipment to carry out
minimum disclosures that U.S. GAAP does not plans
● U.S. GAAP requires disclosures for the current ● Financial management is the task of
and prior two years for all financial statements planning how to obtain these resources
except balance sheet, while IFRS requires and to set the right mix between owner
disclosures for the current and prior year. Still, and creditor financing
the basic principles behind these two systems
are similar
● U.S. GAAP is more rules-based whereas IFRS is
more principles-based
● Both U.S. GAAP and IFRS prepare the same four
basic financial statements
⮚ Sustainability Accounting Standards Board
(SASB) is a non-profit entity engaged in creating
and disseminating sustainability accounting
standards for use by companies CHAPTER 1 (WARREN)
● Sustainability refers to environmental,
INTRODUCTION TO ACCOUNTING AND BUSINESS
social, and governance (ESG) dimensions of
a company NATURE OF BUSINESS AND ACCOUNTING
● We organize financial statement analysis into
Business is an organization in which basic resources
four areas: (1) liquidity and efficiency, (2)
(inputs), such as materials and labor, are assembled and
solvency, (3) profitability, and (4) market
processed to provide goods or services (outputs) to
prospects
customers
● Return on assets is useful in evaluating
management, analyzing and forecasting profits, ● The objective of most businesses is to earn a
and planning activities profit
● There are three major types of business
activities: financing, investing, and operating. Types of Business
Each of these requires planning. Planning
⮚ Service Business – provide services rather than
involves defining an organization’s ideas, goals,
and actions products to customers
⮚ Merchandising Business – sell products they
purchase from other businesses to customers
 the decision-making needs of users outside
⮚ Manufacturing Business – change basic inputs
of the business
into products that are sold to customers
General-purpose financial statements are one type of
Role of Accounting in Business financial accounting report that is distributed to
The role of accounting in business is to provide external users. The term general-purpose refers to the
information for managers to use in operating the wide range of decision-making needs that these reports
business, and to provide other users in assessing the are designed to serve
economic performance and condition of the business Roles of Ethics in Accounting and Business
Accounting can be defined as an information system Ethics are moral principles that guide the conduct of
that provides reports to users about the economic individuals. Ethical violations led to fines, firings, and
activities and condition of a business lawsuits. In some cases, managers were criminally
“Language of business” because accounting is the prosecuted, convicted, and sent to prison.
means by which businesses’ financial information is Two factors in committing business frauds: (1) Failure of
communicated to users Individual Character – an ethical manager and
The process by which accounting provides information accountant is honest and fair, (2) Culture of Greed and
to users: Ethical Indifference – By their behavior and attitude,
senior managers set the company culture
1. Identify users
2. Assess users’ information needs Sarbanes-Oxley Act of 2002 (SOX) – a law to monitor the
3. Design the accounting information system to behavior of accounting and business; established
meet users’ needs standards for independence, corporate responsibility,
4. Record economic data about business activities and disclosure
and events ● SOX established a new oversight body for the
5. Prepare accounting reports for users accounting profession called the Public
Company Accounting Oversight Board (PCAOB)
⮚ Internal Users of accounting information are
directly involved in managing and operating the Opportunities for Accountants
business
⮚ Accountants who provide audit services, called
● The area of accounting that provides
auditors, verify the accuracy of financial
internal users with information is called
records, accounts, and systems
managerial or management accounting.
● The objective of managerial accounting is ⮚ Accountants and their staff who provide
to provide relevant and timely information services on a fee basis (fix charge for work
for managers’ and employees’ performed) are said to be employed in public
decision-making needs accounting
● Managerial accountants employed by a
⮚ Public accountants who have met a state’s
business are employed in private
accounting education, experience, and examination
requirements may become Certified Public
⮚ External Users of accounting information are
Accountants (CPAs)
not directly involved in managing and operating
the business GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
● The area of accounting that provides - Allows investors and other users to compare
external users with information is called one company to another
financial accounting
● The objective of financial accounting is to Financial Accounting Standards Board (FASB) has the
provide relevant and timely information for primary responsibility for developing accounting
principles
Securities and Exchange Commission (SEC), an agency of
the U.S. government, has authority over the accounting
and financial disclosures for companies whose shares of
ownership (stock) are traded and sold to the public

● The SEC normally accepts the accounting

principles set forth by the FASB. However, the
SEC may issue Staff Accounting Bulletins on
accounting matters that may not have been
addressed by the FASB
Cash Flows
International Accounting Standards Board (IASB) issues
International Financial Reporting Standards (IFRSs) ⮚ Operating Activities – This section reports a
Business Entity Concept limits the economic data in an summary of cash receipts and cash payments
accounting system to data related directly to the from operations
activities of the business; the activities of a business are ⮚ Investing Activities – This section reports the
recorded separately from the activities of its owners, cash transactions for the acquisition and sale of
creditors, or other businesses relatively permanent assets
⮚ Financing Activities – This section reports the
Cost Concept – amounts are initially recorded in the cash transactions related to cash investments by
accounting records at their cost or purchase price the owner, borrowings, and withdrawals by the
Objectivity Concept – requires that the amounts owner
recorded in the accounting records be based on ● The interrelationships of financial statements
objective (independent and unbiased) evidence serves as a check on whether the financial
statements are prepared correctly
Unit of measure concept/ Monetary Unit – requires that
economic data be recorded in dollars

THE ACCOUNTING EQUATION

Assets – the resources owned by a business

Liabilities – the rights of creditors are the debts of the

business

Owner’s Equity – the rights of the owners

BUSINESS TRANSACTIONS AND THE ACCOUNTING FINANCIAL ANALYSIS AND INTERPRETATION: RATIO OF
EQUATION LIABILITIES TO OWNER’S EQUITY
Business Transactions – an economic event or condition Analyzing the ability of a company to pay its creditors.
that directly changes an entity’s financial condition or its The relationship between liabilities and owner’s equity,
results of operations expressed as a ratio of liabilities to owner’s equity
● All business transactions can be stated in terms ● the lower the ratio of liabilities to owner’s
of changes in the elements of the accounting equity, the better able the company is to
equation withstand poor business conditions and to pay
FINANCIAL STATEMENTS its obligations to creditors

After transactions have been recorded and summarized,

reports are prepared for users. The accounting reports
providing this information are called financial
statements.
CHAPTER 1 (WILLIAMS) ● The basic purpose of accounting system is to
meet the organization’s needs for information
ACCOUNTING: INFORMATION FOR DECISION MAKING
as efficiently as possible
ACOUNTING INFORMATION: A MEANS TO AN END
Factors that affect the structure of the accounting
● Accounting is not an end, but rather it is a system: (1) the company’s needs for accounting
means to an end information and (2) the resources available for
operation of the system
The final product of accounting information is the
decision that is enhanced by the use of that information Must be cost-effective - the value of the information
that have an interest in the financial performance of an produced should exceed the cost of producing it
enterprise.
Basic Functions of Accounting System
Because accounting is widely used to describe all types
1. Interpret and record the effects of business
of business activity, it is sometimes referred to as the
transactions
language of business
2. Classify the effects of similar transactions in a
Accounting from a User’s Perspective manner that permits determination of the
various totals and subtotals useful to
Accounting information is the means by which we management and used in accounting reports
measure and communicate economic events 3. Summarize and communicate the information
Types of Accounting Information contained in the system to decision makers

Components of Internal Control

⮚ Financial accounting refers to information
describing the financial resources, obligations, Internal control is a process designed to provide
and activities of an economic entity; often reasonable assurance that the organization produces
called “general-purpose” accounting reliable financial reports, complies with applicable laws
information because it is used in many different and regulations, and conducts its operations in an
purposes efficient and effective manner
● Financial position – an entity’s financial ⮚ Control environment - the foundation for all the
resources and obligations at a point in time other elements of internal control, setting the
● Results of operations – financial activities during overall tone for the organization
the year ⮚ Risk assessment - identifying, analyzing, and
⮚ Management/ managerial accounting – involves managing those risks that pose a threat to the
achievement of the organization’s objectives
the development and interpretation of
⮚ Control activities - the policies and procedures
accounting information intended specifically to
that management puts in place to address the
assist management in operating the business
risks identified during the risk assessment
⮚ Tax accounting – it results from a different
process
system and complies with specialized legal
requirements that relate to a company’s ⮚ Information and communication - involves
responsibility to pay an appropriate amount of developing information systems to capture and
taxes communicate operational, financial, and
ACCOUNTING SYSTEMS compliance-related information necessary to
run the business
Accounting system is used (1) to develop accounting
⮚ Monitoring - enables the company to evaluate
information and (2) to communicate this information to
decision makers the effectiveness of its system of internal
control over time
Sarbanes-Oxley Act (SOX) of 2002 - public companies Financial statements
issue a yearly report indicating whether they have an
effective system of internal control over financial ⮚ Statement of Financial Position (Balance Sheet)
reporting is a position statement that shows where the
FINANCIAL ACCOUNTING INFROMATION company stands in financial terms at a specific
date; a snapshot of the business in financial or
Financial accounting provides information about the dollar terms
financial resources, obligations, and activities of an
⮚ Statement of Comprehensive Income (Income
enterprise that is intended for use primarily by external
decision makers – investors and creditors Statement) is an activity statement that shows
details and results of the company’s
External Users of Accounting Information – have a profit-related activities for a period of time;
current or potential financial interest in the reporting depicts the profitability of an enterprise for a
enterprise; are not involved in the day-to-day operations designated period of time
of that enterprise ⮚ Statement of Cash Flows is an activity statement
Objectives of External Financial Reporting that shows the details of the company’s
activities involving cash during a period of time;
Cash flow prospects if you had invested or loaned important in understanding an enterprise for
money into a company: (1) return of investment - return purposes of investment and credit decisions
to you at some future date of the amount you had
invested or loaned, (2) return on investment - the CHARACTERISTICS OF EXTERNALLY REPORTED
company to pay you something for the use of your FINANCIAL INFORMATION
funds, either as an owner or a creditor Financial Reporting (A Means) - to improve the quality
Objectives of Financial Reporting: Building from General of decision making by external parties
to Specific ● Financial statements themselves are simply a
1. Provide general information useful in making means by which that end is achieved
investment and credit decisions – by meeting Financial Reporting versus Financial Statements –
the information needs of investors and financial reporting is more broader than f/s
creditors, we provide general information that is
also useful to many other important financial ● External users take advantage of many sources
statement users of information that are available to support
2. Provide information that is useful in assessing their economic decisions about an enterprise
the amount, timing, and uncertainty of future Historical in Nature - It looks back in time and reports
cash flows - investors and creditors are the results of events and transactions that have already
interested in future cash flows; to provide occurred; very useful in assessing the future
general information that permits that kind of
analysis ● In recent years, accounting standard setters are
3. Provide specific information about economic requiring greater use of fair values, rather than
resources, claims to resources, and changes in historical costs, in measuring assets and
resources and claims – in over time liabilities

Inexact and Approximate Measures - is based on

estimates, judgments, and assumptions that must be
made about both the past and the future
One of the primary ways investors and creditors assess General-purpose Assumption – “one size fits all”
whether an enterprise will be able to make future cash
payments is to examine and analyze the enterprise’s Usefulness Enhanced via Explanation – this information
financial statements is often non quantitative and helps to interpret the
financial numbers that are presented
 ● Financial information and statements is Measures of Efficiency and Effectiveness - resource
accompanied by a number of notes and other usage; an assessment can be made of how effective
explanations that help explain and interpret the management is in achieving the organization’s mission
numerical information
Management Accounting Information—A Means –
MANAGEMENT ACCOUNTING INFORMATION ultimate objective is to design and use an accounting
system that helps management achieve the goals and
Management create and use internal accounting
objectives of the enterprise
information not only for exclusive use inside the
organization but also to share with external decision Integrity of Accounting Information
makers
Objectivitygovernment agenc BI – complete,
Database warehousing approach for the creation of unbroken, unimpaired, sound, honest, and sincere
accounting information systems allows management
● Must have these qualities because of the
and other designated employees access to information
significance of the information to individuals
to create a variety of accounting reports, including
who rely on it in making important financial
required external financial reports
decisions
Objectives of Management Accounting Information
Integrity of accounting information is enhanced in three
Enterprises have mission statement – these goals can primary ways
vary widely among enterprises ranging from non-profit
organizations, where goals are aimed at serving ⮚ Certain institutional features add significantly to
specified constituents, to for profit organizations, where the integrity of accounting information
goals are directed toward maximizing the owners’
⮚ Several professional accounting organizations
objectives
play unique roles
● Providing constituents evaluative information is
only one objective of accounting systems ⮚ Personal competence, judgment, and ethical
● In many enterprises management creates a behavior of professional accountants
reward system linked to performance as
Institutional Features
measured by the accounting system
Generally accepted accounting principles – provide the
Characteristics of Management Accounting Information
general framework for determining what information is
The accounting information created and used by included in financial statements and how this
management is intended primarily for planning and information is to be prepared and presented
control decisions
Accounting Principles
Internal Accounting Information Characteristics
● Originate from a combination of tradition,
Importance of Timeliness – accounting information experience, and official decree
needs to be timely; enterprises are constantly ● Require authoritative support and some means
monitoring and controlling ongoing activities of enforcement
● Are sometimes arbitrary
Identity of Decision Maker - Information that is
● May change over time as shortcomings in the
produced to monitor and control processes needs to be
existing rules come to light
provided to those who have decision-making authority
● Must be clearly understood and observed by all
to correct problems
participants in the process
Oriented toward the Future - the purpose in creating
International Accounting Standards Board (IASB) is
and generating it is to affect the future
currently attempting to establish greater uniformity
among the accounting principles in use around the
world in order to facilitate business activity that Audit is an investigation of a company’s financial
increasingly is carried out in more than one country statements, designed to determine the integrity of
these statements
Securities and Exchange Commission is a governmental
agency with the legal power to establish accounting ● Assurance is provided by an audit of the
principles and financial reporting requirements for company’s financial statements, performed by a
publicly owned corporations firm of certified public accountants (CPAs);
these auditors are experts in the field of
● accounting principles continue to be developed
financial reporting and are independent of the
in the private sector but are given the force of
company issuing the financial statements
law when they are adopted by the SEC
● Accountants and auditors use the term fair in
Financial Accounting Standards Boards (FASB) - the most describing financial statements that are reliable
authoritative source of generally accepted accounting and complete, conform to generally accepted
principles accounting principles, and are not misleading

- is part of the private sector of the economy— it Personal Organizations

is not a governmental agency
American Institute of CPAs (AICPA) – is a professional
Conceptual framework sets forth the FASB’s views as to association of certified public accountants; its mission is
the: to provide members with the resources, information,
and leadership to enable them to provide valuable
● Objectives of financial reporting services in the highest professional manner to benefit
● Desired characteristics of accounting the public, employers, and client
information (such as relevance, reliability, and
understandability) - works designw with the FASB in the
● Elements of financial statements establishment and interpretation of generally
● Criteria for deciding what information to include accepted accounting principles
in financial statements
Institute of Management Accountants (IMA) – to
● Valuation concepts relating to financial
provide members personal and professional
statement amounts
development opportunities through education,
International Accounting Standards Board (IASB) – is association with business professionals, and certification
playing a leading role in the harmonization process;
- is recognized by the financial community as a
issues International Financial Reporting Standards (IFRS)
respected organization that influences the
AICPA – which essentially has jurisdiction over private concepts and ethical practice of management
company reporting, accepts either FASB standards or accounting and financial management
IASB standards as authoritative sources of accounting ● Certified Management Accountant (CMA)
principles testifies to the individual’s competence and
expertise in management accounting and
Public Company Accounting Oversight Board (PCAOB) - financial management
was created as a result of the Sarbanes-Oxley Act of
2002 and began operations in the spring of 2003 Institute of Internal Auditors (IIA) – is the primary
international professional association dedicated to the
- sets auditing standards for audits of publicly promotion and development of the practice of internal
traded companies, an activity that previously auditing
was performed by the accounting profession
- as five members who serve a five-year term and American Accounting Association (AAA) – improving
are eligible to be reappointed once accounting education by better preparing accounting
professors and on advancing knowledge in the
Audits of Financial Statements accounting discipline through research and publication
Committee of Sponsoring Organizations of the Treadway
⮚ Management Accounting - the management
Commission (COSO) – is a voluntary private sector
organization dedicated to improving the quality of accountant works for one enterprise; develop
financial reporting through business ethics, effective and interpret accounting information designed
internal controls, organizational governance, and specifically to meet the various needs of
enterprise risk management management
● Chief Accounting Officer (COA) or
Competence, Judgement, and Ethical Behavior Controller - is responsible for running
the business, setting its objectives, and
● Management accountants are not required to
seeing that these objectives are met
be licensed as CPAs; they voluntarily may earn a
Certified Management Accountant (CMA) or a ⮚ Governmental Accounting
Certified Internal Auditor (CIA) as evidence of ● Government Accountability Office
their professional competence (GOA) – audits many agencies of the
● Users of accounting information—both external federal government, as well as some
and internal—recognize that the reliability of private organizations doing business
the information is affected by the competence, with the government; to evaluate the
professional judgment, and ethical standards of efficiency of an entity’s operations or to
accountants determine the fairness of accounting
Careers in Accounting information reported to the
government
There is no single recognized definition of a profession, ● Internal Revenue Service (IRS) – handles
but all of these fields have several characteristics in the millions of income tax returns filed
common annually by individuals and business
organizations and frequently performs
⮚ all professions involve a complex and evolving intauditing functions to verify data
body of knowledge contained in these returns
● Securities and Exchange Comminsion
⮚ practitioners must use their professional
(SEC) – the watch dog of financial
judgment to resolve problems and dilemmas reporting
⮚ the unique responsibility of professionals to ⮚ Accounting Education - offers opportunities for
serve the public’s best interest, even at the teaching, research, consulting, and an unusual
sacrifice of personal advantage degree of freedom in developing individual skills
Career opportunities in accounting Bookkeeping – the clerical side of accounting—the
recording of routine transactions and day-to-day record
⮚ Public Accounting - These individuals may work keeping
in a CPA firm or as sole practitioners
● Management Advisory Services/
Management Consulting – public
sub-discipline; advice
● CPAs assist management because
financial considerations enter into
almost every business decision
● CPA Examination - a person must meet
several criteria, including an extensive
university education requirement,
passing the CPA examination, and
meeting a practice experience
requirement