Chapter 1 - Accounting in business, after completing this chapter you should be able to: Explain the purpose and importance of accounting; Identify users and uses of, and opportunities in, accounting; explain why ethics are crucial to accounting; explain generally accepted accounting principles and define and apply several accounting principles. | Chapter 1 ACCOUNTING IN BUSINESS Chapter 1: Accounting in Business Identifying Select transactions and events Recording Input, measure and classify Communicating Prepare, analyze and interpret IMPORTANCE OF ACCOUNTING Accounting C 1 Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization’s business activities. Identifying business activities requires selecting transactions and events relevant to an organization. Recording business activities requires keeping a chronological log of transactions and events measured in dollars and classified and summarized in a useful format. Communicating business activities requires preparing accounting reports such as financial statements. It also requires analyzing and interpreting such reports. USERS OF ACCOUNTING INFORMATION External Users Lenders Shareholders Governments Consumer Groups External Auditors Customers Internal Users Managers Officers/Directors Internal Auditors Sales Staff Budget Officers Controllers C 2 Accountants prepare reports for both external and internal users. External users of accounting information are not directly involved in running the organization. Examples of external users are lenders, shareholders (investors), governments, consumer groups, customers, and the external auditors. Internal users of accounting information are those directly involved in managing and operating an organization. They use the information to help improve the efficiency and effectiveness of an organization. Examples of internal users are managers, officers/directors, internal auditors, sales staff, budget officers and controllers. External Users Financial accounting provides external users with financial statements. Internal Users Managerial accounting provides information needs for internal decision-makers. C 2 USERS OF ACCOUNTING INFORMATION Financial accounting is the area of accounting aimed at serving external . | Chapter 1 ACCOUNTING IN BUSINESS Chapter 1: Accounting in Business Identifying Select transactions and events Recording Input, measure and classify Communicating Prepare, analyze and interpret IMPORTANCE OF ACCOUNTING Accounting C 1 Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization’s business activities. Identifying business activities requires selecting transactions and events relevant to an organization. Recording business activities requires keeping a chronological log of transactions and events measured in dollars and classified and summarized in a useful format. Communicating business activities requires preparing accounting reports such as financial statements. It also requires analyzing and interpreting such reports. USERS OF ACCOUNTING INFORMATION External Users Lenders Shareholders Governments Consumer Groups External Auditors Customers Internal Users Managers .
