Accounting_Lesson1.pdf

ACCOUNTING IN ACTION BC051 | Fundamentals of Accounting | Aug 22, 2024 Max Coralde BS IHM CA | Ms. Janelle Tamayo | First Year, 1st Sem AUG - DEC ACCOUNTING ACTIVITIES AND USERS ❖ Accounting consists of three basic activities: identifies, records, and communica...

ACCOUNTING IN ACTION BC051 | Fundamentals of Accounting | Aug 22, 2024 Max Coralde BS IHM CA | Ms. Janelle Tamayo | First Year, 1st Sem AUG - DEC ACCOUNTING ACTIVITIES AND USERS ❖ Accounting consists of three basic activities: identifies, records, and communicates the economic events of an organization to interested users. ACCOUNTING ACTIVITIES ❖ IDENTIFY “What economic activities are relevant to the business?” ❖ RECORD “What is the history of the financial activity?” ❖ COMMUNICATE “What does the financial data mean?” THE ACCOUNTING PROCESS ❖ IDENTIFICATION Select economic events (transactions) ↓ ❖ RECORDING Record, classify, and summarize ↓ ❖ COMMUNICATION Prepare accounting reports and analyze and interpret for users USERS OF ACCOUNTING DATA ❖ is divided into two groups INTERNAL USERS (primary users) Internal users of accounting information are the managers who plan, organize, and run a business ex. Internal Management Proprietors/Partners Employees EXTERNAL USERS (secondary users) External users are individuals and organizations outside a company who want financial information about the company ex. Investors Lenders Legal Bodies Customers Suppliers General Public Government Researchers. 1 ACCOUNTING IN ACTION BC051 | Fundamentals of Accounting | Aug 22, 2024 Max Coralde BS IHM CA | Ms. Janelle Tamayo | First Year, 1st Sem AUG - DEC MANAGERIAL ACCOUNTING ❖ Focused on internal management ❖ Provides them with financial information that helps them make informed decisions about the company’s operations FINANCIAL ACCOUNTING ❖ Primarily concerned with external stakeholders (investors & creditors) ❖ Focused on producing financial statements that accurately reflect the financial position and performance of the company MANAGERIAL ACCOUNTING VS FINANCIAL ACCOUNTING ❖ Not subject to any specific set of ❖ Governed by Generally Accepted standards Accounting Principles (GAAP) ❖ Reports can be produced on an ad-hoc ❖ Reports are typically prepared on a basis as needed periodic basis (e.g. monthly or quarterly) QUESTIONS ASKED BY…. ❖ INTERNAL USERS Finance Is cash sufficient to pay dividends to *company* stockholders Marketing What price should *company* charge for an iPhone to maximize the company’s net income? Human Resources Can *company* afford to give its employees pay raises this year? Management Which *company* product line is the most profitable? Should any of the product lines be eliminated? ❖ EXTERNAL USERS Investors Is *company* earning satisfactory income? Investors How does *company A* compare in size and profitability with *company B* Creditors Will *company* be able to pay its debt as they come due? 2