CHAPTER

Settin
g the Taiwan Semiconductor Manufacturing
Company Limited (TSMC), the world’s first
Stage dedicated and largest semiconductor foundry
service provider, was founded in 1987 and is
headquartered in Hsinchu, Taiwan.

TSMC is listed on Taiwan Stock Exchange

(TSE) and the NYSE via American Depositary
Receipts (ADR).

TSMC follows IFRS for financial statements

filed for TSE in Taiwan, and USA GAAP for
NYSE.
CHAPTER
Accounting Information:
1 Users and Uses

LO1 LO2 LO3 LO4

Within What Kind So, Why
What’s the Who Uses
of Environment Should I
Purpose of Accounting
Does Accounting Study
Accounting? Information?
Operate? Accounting?
 What’s the Purpose of Accounting?

LO1 What is an Accounting System?

Exhibit 1.1
Functions of an Accounting System

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 4
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO1 The Purpose of Accounting

Quantitative Useful

Financial Decisions

 Accounting is a system for providing “quantitative

information, primarily financial in nature, about economic
entities that is intended to be useful in making economic
decisions.”

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 5
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Distinction between Accounting and
LO1 Bookkeeping 簿記
Bookkeeping Accounting
 A routine recording process  Involving the analysis of
subsequent to transaction transactions (or activities).
analysis.
 Relating only to the recording of  Including providing information
transactions. for decision-making and can
affect economic consequences.
 A component of accounting.

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 6
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO1 The Decision-Making Process

Step Step Step Step

Identify Gather Identify Select the option

The issue. Information. alternatives. that will most
likely result in
the desired
objective.

Exhibit 1.2
The Decision-Making Process

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 7
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO1 The Relationship of Accounting to Business

 Accounting is called the “language of business.”

 Accounting provides information for making informed
decisions about how to best use available resources.
Three sources of resources (capital):
► Investors (owners)
► Creditors (lenders)
► The retained earnings
 Accountants play two roles with regard to these activities:
► Measuring and reporting (follow the accounting cycle)
► Advising
© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 8
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO1 The Relationship of Accounting to Business
Exhibit 1.3
Activities Common to
Business Organizations

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 9
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Who Uses Accounting Information?

LO2 Who Uses Accounting Information?

 The accounting system generate financial reports.
 Two major categories of reports: internal and external

Exhibit 1.4
Output of the Accounting
© Cycle
2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 10
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO2 Who Uses Accounting Information?
Management Accounting 管理會計
► The area of accounting concerned with providing
internal financial reports to assist management in
making decisions.
► Management accounting focuses on the information
needed for planning, implementing plans, and
controlling costs. Its information is not available to
outsiders.
Financial Accounting 財務會計
► The area of accounting concerned with reporting
financial information to interested parties.
© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 11
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO2 Who Uses Accounting Information?

Internal Users (Management Accounting):

– Management
Examples of Internal Reports:
► Budgets

► Cost analyses
► Divisional performance reports

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 12
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO2 Who Uses Accounting Information?
External Users (Financial Accounting):
– Lenders (creditors) – Employees
– Investors – Competitors
– Management – Government agencies
– Suppliers & Customers – The press

Examples of External Reports:

► Annual report
► General-purpose financial statements
► Other regulatory reports
© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 13
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO2 General-Purpose Financial Statements

Primary Financial Statements

Balance Sheet 資產負債表

Statement of Comprehensive Income 綜合損益表

Statement of Changes in Equity 權益變動表

Statement of Cash Flows 現金流量表

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 14
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Within What Kind of Environment Does Accounting Operate?

LO3 The Environment of Accounting

Important factors that influence the environment in which

accounting operates:
► Generally accepted accounting principles (GAAP)
一般公認會計原則
► International business Authoritative guidelines that
define accounting practice at
► Ethical a particular time
considerations
► Technology

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 15
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Significance and Development
LO3 of Accounting Standards

 In most countries in the world, a committee or board

establishes the accounting rules, which serves as the
GAAP for that country.
 Companies in the country then need to follow the country’s
GAAP in preparing financial statements.
 Using the same GAAP in the country allows users to make
comparisons.

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 16
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO3 Accounting-Standards Setters

The International Accounting Standards Board (IASB)

國際會計準則理事會
► To develop a worldwide accounting standards.
► Prior to the IASB, the International Accounting Standards
Committee (IASC) issued International Accounting Standards
(IAS).Today, the IFRS and IAS and their related
interpretations are collectively termed as IFRS.
 International Financial Reporting Standards (IFRS) 國
際財務報導準則
 International Accounting Standards (IAS) 國際會計準則

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 17
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO3 Accounting-Standards Setters
The Financial Accounting Standards Board (FASB)
美國財務會計準則理事會
► The private organization responsible for establishing the
standards for financial accounting and reporting in the United
States. The FASB has no legal power to enforce the
accounting standards it sets.
► Get its authority to establish rules from the Securities and
Exchange Commission (SEC) 美國證券交易委員會 .

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 18
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO3 Other Organizations

Securities and Exchange Commission (SEC)

► The government body responsible for regulating the financial
reporting practices of most publicly owned corporations in
connection with the buying and selling of stocks and bonds.

American Institute of Certified Public Accountants

(AICPA) 美國會計師協會
► The national organization of CPAs in the United States.

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 19
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO3 Other Organizations

Internal Revenue Service (IRS) 美國國家稅務局

► A government agency that prescribes the rules and
regulations that govern the collection of tax revenues in the
United States.
▶ Financial accounting and tax accounting involve different
sets of rules because they are designed for different
purposes.
Companies must maintain two sets of books: financial accounting
and tax accounting

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 20
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO3 International Business

 The international nature of business requires companies to

be able to make their financial statements understandable
to users all over the world.
 A set of worldwide accounting standards such as IFRS
was created to alleviate this complication.

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 21
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO3 Ethics in Accounting

 Ethics is involved in preparing and using financial

information.
► The accounting scandals: Enron, WorldCom, and Tyco.
 Accountants are perceived by the public as being
responsible for ensuing misrepresentation does not occur.
► The creation of the PCAOB is an example of the SEC’s intent
to ensure the quality of reported financial information.
► The Auditing Standards Board and the major stock
exchanges took similar measures to restore the image of the
accounting professional as ethical.

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 22
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
LO3 Technology

 Computer technology allows companies to

► Easily gather vast amounts of information about individual
transactions.
► Compile large amounts of data quickly and accurately,
thereby significantly reducing the likelihood of errors.
► Lenders and investors are able to acquire and analyze
financial information in an effective and efficient manner.
 Technology has not replaced judgment.

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 23
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 So, Why Should I Study Accounting?

LO4 Why Should I Study Accounting?

Everyone Makes Financial Decisions

s in g Budgeting
a
g v s. le
B uyin

in g
n c
Investing i na
F

FYI
The AICPA provides a Web site that introduces students to career opportunities
in accounting. The Web site is [Link]

© 2021 Cengage. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license 24
distributed with a certain product or service or otherwise on a password-protected website for classroom use.