Chapter 1 - Summary LO 1 Discuss accounting as the language of business and the role of accounting information
in making economic decisions. Accounting is the means by which information about an enterprise is communicated
and, thus, is sometimes called the language of business. Many different users
have need for accounting information in order to make important decisions. These
users include investors, creditors, management, governmental agencies, labor
unions, and others. Because the primary role of accounting information is to
provide useful information for decision-making purposes, it is sometimes referred
to as a means to an end, with the end being the decision that is helped by the
availability of accounting information. LO 2 Discuss the significance of accounting systems in generating reliable accounting
information. Information systems are critical to the production of quality accounting information
on a timely basis and the communication of that information to decision makers.
While there are different types of information systems, they all have one characteristic
in common - to meet the organization's needs for accounting information as efficiently
as possible. LO 3 Explain the importance of financial accounting information for external parties
- primarily investors and creditors - in terms of the objectives and the characteristics
of that information. The primary objectives of financial accounting are to provide information that
is useful in making investment and credit decisions; in assessing the amount,
timing, and uncertainty of future cash flows; and in learning about the enterprise's
economic resources, claims to resources, and changes in claims to resources.
Some of the most important characteristics of financial accounting information
are it is a means to an end, it is historical in nature, it results from inexact
and approximate measures of business activity, and it is based on a general-purpose
assumption. LO 4 Explain the importance of management accounting information for internal parties - primarily management - in terms of the objectives and the characteristics
of that information. Management accounting information is useful to the enterprise in achieving
its goals, objectives, and mission; assessing past performance and future directions;
and evaluating and rewarding decision-making performance. Some of the important
characteristics of management accounting information are its timeliness, its
relationship to decision-making authority, its future orientation, its relationship
to measuring efficiency and effectiveness, and the fact that it is a means to
an end. LO 5 Discuss elements of the system of external and internal financial reporting
that create integrity in the reported information. Integrity of financial reporting is important because of the reliance that
is placed on financial information by users both outside and inside the reporting
organization. Important dimensions of financial reporting that work together
to ensure integrity in information are institutional features (accounting principles,
internal structure, and audits); professional organizations (AICPA, IMA, CIA,
AAA); and the competence, judgment, and ethical behavior of individual accountants. LO 6 Identify and discuss several professional organizations that play important
roles in the communication of accounting information. The FASB and SEC are important organizations in terms of standard setting in
the United States. The FASB is a private-sector organization that works closely
with the SEC, which has legal authority to designate financial reporting standards
for publicly held companies. Professional organizations that provide services
to individual accountants in various segments of the accounting profession are
the AICPA, IMA, IIA, and the AAA. LO 7 Discuss the importance of personal competence, professional judgment, and ethical
behavior on the part of accounting professionals. Personal competence and professional judgment are, perhaps, the most important
factors in ensuring the integrity of financial information. Competence is demonstrated
by one's education and professional certification (CPA, CMA, CIA). Professional
judgment is important because accounting information is often based on inexact
measurements and assumptions are required. Ethical behavior refers to the quality
of accountants being motivated to "do the right thing" in applying
their skills. LO 8 Describe various career opportunities in accounting. Accounting opens the door to many diverse career opportunities. Public accounting
is the segment of the profession where professionals offer audit, tax, and consulting
services to clients. Management, or managerial, accounting refers to that segment
of the accounting profession where professional accountants work for individual
companies in a wide variety of capacities. Many accountants work for various
governmental agencies. Some accountants choose education as a career and work
to prepare students for future careers in one of the other segments of the accounting
profession. While keeping detailed records (that is, bookkeeping) is a part
of accounting, it is not a distinguishing characteristic of a career in accounting;
in fact, many accounting careers involve little or no bookkeeping. In this chapter we have established a framework for your study of accounting.
You have learned how financial accounting provides information for external
users, primarily investors and creditors, and how management accounting provides
information for internal management. We have established the importance of integrity
in accounting information and have learned about several things that build integrity.
Looking ahead, in Chapter 2 we begin to look in greater depth at financial accounting
and, more specifically, financial statements. You will be introduced to the
three primary financial statements that provide information for investors and
creditors. As the text progresses, you will learn more about the wealth of important
information that these financial statements provide and how that information
is used to make important financial decisions. | 
2002 McGraw-Hill Higher Education