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Accounting Essentials for Managers

Accounting provides essential information for business decision making. It measures business transactions, processes that information into financial statements, and communicates results to managers and other users. The accounting system collects data on business events, allows accountants to analyze and record this information, and provides financial statements to users like investors, lenders, and managers. Understanding accounting is crucial for operating managers since it serves as the scoreboard of the business and helps measure performance.

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Rishabh Bisht
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52 views17 pages

Accounting Essentials for Managers

Accounting provides essential information for business decision making. It measures business transactions, processes that information into financial statements, and communicates results to managers and other users. The accounting system collects data on business events, allows accountants to analyze and record this information, and provides financial statements to users like investors, lenders, and managers. Understanding accounting is crucial for operating managers since it serves as the scoreboard of the business and helps measure performance.

Uploaded by

Rishabh Bisht
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

Accounting for Managers

Objective of the Course


Understanding the Mechanics of Accounting To understand the concepts and measurements that underlie corporate financial statements To gain an understanding of the choices firms make in reporting the results of business activities

Accounting: The Language of Business


Means of communicating information about the business

Importance of Accounting
Accounting is the scoreboard of business Like a ball player who cannot keep score, an operating manager who does not fully understand and appreciate Financial Statements, works under an unnecessary handicap. You cannot manage what you cannot measure.

ACCOUNTING
Accounting is the language of business Accounting is the information system that
Measures business activities Processes that information into reports Communicates the results to decision makers The basis of Decision Making

THE ACCOUNTING SYSTEM: THE FLOW OF INFORMATION


1. People make decisions

2. Business transactions occur

3. Businesses prepare reports to show the results of their operations

Accounting as an Aid to Decision Making


Fundamental relationships in the decisionmaking process:

Event

Accountants analysis & recording

Financial Statements

Users

The Accounting Information System


Inputs Processing Outputs
Financial statements and reports

Users
Investors, lenders, managers

Business Accounting transactions principles and events and procedures

The Nature of Accounting


Accounting systems are designed to meet the needs of the decisions makers who use the financial information. Every business has some sort of accounting system.
These accounting systems may be very complex or very simple, but the real value of any accounting system lies in the information that the system provides.

Accounting - a process of identifying, recording, summarizing, and reporting economic information to decision makers in the form of financial statements
Financial accounting - focuses on the specific needs of decision makers external to the organization, such as stockholders, suppliers, banks, and government agencies

Users of Accounting Information


Accounting

Management Decisions

Users with Direct financial interest

Users with indirect financial interest

Chapter 1

Users of Accounting Information


Investors Lenders Security analysts and advisers Managers Employees and trade unions Suppliers and other trade creditors Customers Government and regulatory agencies The public

TYPES OF BUSINESS ORGANIZATIONS


Proprietorships
Have a single owner who is generally the manager Are business entities, but not legal entities Have debt for which the proprietor is personally liable

TYPES OF BUSINESS ORGANIZATIONS


Partnerships
Join two or more persons together as co-owners Are business entities, but not legal entities Have debt for which each partner is personally liable

TYPES OF BUSINESS ORGANIZATIONS


Corporations
Are owned by stockholders or shareholders Are business entities and legal entities Are liable for all debts
Stockholders have no personal obligation for corporation debts

DOUBLE-ENTRY ACCOUNTING
The Double-Entry System Every Transaction has two sides to it The Debit and Credit Each transaction affects at least two accounts

THE ACCOUNTING EQUATION


The accounting equation presents the resources of the business and the claims to those resources
Economic Resources = Claims to Economic Resources or Assets = Liabilities + Owners Equity

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