Lecture Accounting: What the numbers mean (5/e) - Chapter 1: Accounting - Present and past

After reading this chapter, you should be able to answer the following questions: What is the FASB? Who uses accounting information and why? What is accounting? What do accountants do? Where did accounting come from? Where did accounting standards come from? What are the accounting ethical standards? What is the Conceptual Framework? Why do businesses report financial information?

CHAPTER ACCOUNTING PRESENT AND PAST McGraw­Hill/Irwin ©The McGraw­Hill Companies, Inc., 2002 Learning Objectives What is the FASB? Who uses accounting information and why? What is accounting? What accountants do? Where did accounting come from? McGraw­Hill/Irwin ©The McGraw­Hill Companies, Inc., 2002 Learning Objectives Where did accounting standards come from? What are the accounting ethical standards? What is the Conceptual Framework? Why businesses report financial information? McGraw­Hill/Irwin ©The McGraw­Hill Companies, Inc., 2002 Learning Objective ã What is accounting? McGrawưHill/Irwin âTheMcGrawưHillCompanies,Inc.,2002 Accounting is the process of: Identifying Measuring Communicating McGraw­Hill/Irwin Economic information about an entity > For decisions and informed judgments ©The McGraw­Hill Companies, Inc., 2002 Learning Objective • Who uses accounting information and why? McGrawưHill/Irwin âTheMcGrawưHillCompanies,Inc.,2002 Users of Accounting Information ã Management - planning, directing, controlling • Investors - return • Creditors - probability of collection • Employees - job prospects and retirement benefits • SEC - full disclosure of financial information McGraw­Hill/Irwin ©The McGraw­Hill Companies, Inc., 2002 Learning Objective ã What accountants do? McGrawưHill/Irwin âTheMcGrawưHillCompanies,Inc.,2002 Professional Services Provided by Accountants • • • • • Financial Accounting Managerial/Cost Accounting Auditing - Public Accounting Internal Auditing Governmental and Not-for-Profit Accounting ã Income Tax Accounting McGrawưHill/Irwin âTheMcGrawưHillCompanies,Inc.,2002 Learning Objective • Where did accounting come from? McGraw­Hill/Irwin ©The McGraw­Hill Companies, Inc., 2002 Early History of Accounting • Found accounting records on Mesopotamian clay tablets from 3000 BC • Luca Pacioli published a description of double-entry bookkeeping systems in 1494 • Industrial revolution led to non-owner managers who needed to report financial information to owners McGraw­Hill/Irwin ©The McGraw­Hill Companies, Inc., 2002 Accounting Profession in the United States • The Securities Act of 1933 and the Securities Exchange Act of 1934 gave the SEC the authority to establish accounting principles for SEC firms • The SEC delegated standard setting to other organizations – Committee on Accounting Procedure 1939 - 1959 – Accounting Principles Board 1959 -1973 – Financial Accounting Standards Board 1973 present McGraw­Hill/Irwin ©The McGraw­Hill Companies, Inc., 2002 Learning Objective ã What is the FASB? McGrawưHill/Irwin âTheMcGrawưHillCompanies,Inc.,2002 Financial Accounting Standards Board • Has issued seven concept statements • Has issued over 140 standards statements • Uses due process is setting standards McGrawưHill/Irwin âTheMcGrawưHillCompanies,Inc.,2002 Learning Objective ã Where did accounting standards come from? McGrawưHill/Irwin âTheMcGrawưHillCompanies,Inc.,2002 Other Accounting Standards ã Cost Accounting Standards Board government contracts, colleges and universities that receive federal research funds • Governmental Accounting Standards Board state and local governments • International Accounting Standards Committee - seeks comparability of financial statements across nations McGraw­Hill/Irwin ©The McGraw­Hill Companies, Inc., 2002 Learning Objective ã What are the accounting ethical standards? McGrawưHill/Irwin âTheMcGrawưHillCompanies,Inc.,2002 Ethics in the Accounting Profession • American Institute of Certified Public Accountants • Institute of Management Accountants McGraw­Hill/Irwin • Integrity - honest and forthright • Objectivity impartial and free from conflicts of interest âTheMcGrawưHillCompanies,Inc.,2002 Learning Objective ã What is the Conceptual Framework? McGrawưHill/Irwin âTheMcGrawưHillCompanies,Inc.,2002 Conceptual Framework ã Standards are based on a foundation provided by the Statements of Financial Accounting Concepts: – Objectives of financial reporting – Qualitative characteristics of accounting information – Elements of financial statements – Recognition and measurement in financial statements – Using cash flow information McGrawưHill/Irwin âTheMcGrawưHillCompanies,Inc.,2002 Learning Objective ã Why businesses report financial information? McGraw­Hill/Irwin ©The McGraw­Hill Companies, Inc., 2002 Concepts Statement No 1: Objectives of Financial Reporting • Intended for investors and creditors • For assessing the amounts, timing, and uncertainty of prospective cash flows • For providing information about economic resources and claims to those resources McGraw­Hill/Irwin ©The McGraw­Hill Companies, Inc., 2002 ... Financial Accounting Managerial/Cost Accounting Auditing - Public Accounting Internal Auditing Governmental and Not-for-Profit Accounting • Income Tax Accounting McGrawưHill/Irwin âTheMcGrawưHillCompanies,Inc.,2002... Where did accounting standards come from? What are the accounting ethical standards? What is the Conceptual Framework? Why businesses report financial information? McGrawưHill/Irwin âTheMcGrawưHillCompanies,Inc.,2002...Learning Objectives What is the FASB? Who uses accounting information and why? What is accounting? What accountants do? Where did accounting come from? McGraw­Hill/Irwin ? ?The? ?McGraw­Hill Companies, Inc., 2002