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Title: Introduction to Accounting
Description: A brief introduction into financial accounting.
Description: A brief introduction into financial accounting.
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Sometimes, there is the risk of the interest of various user groups to collide given
the distribution of business wealth
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Financial statements – the main providers for accounting information; other
sources include: meetings with managers of the business, economy-wide reports,
industry reports, information-gathering agencies, website of the business, public
announcements made by the business
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The kinds of qualities that accounting information possesses in order for it to be
useful – possible to identify
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ON THE GRAPH The broken line indicates the point at which the gap between the
value of information and the cost of providing that information is at its greatest
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(but not always, see
the example with the broken car)
Accounting is part of the total information system within a business
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MANAGEMENT ACCOUNTING = seeks to meet the needs of the business’s
managers
FINANCIAL ACCOUNTING = seeks to meet the needs of providers of finance, but
will also be of use to other user groups
The difference in their targeted user groups has led to each strand of accounting
developing along different lines
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A reports might also
contain non-financial information that might be less objective and verifiable
Management accounting is less constrained that financial accounting
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Other users have to rely on managers are prepared to provide or what
financial reporting regulations insist must be provided
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Financial accounting has improved its framework and there has been
greater international harmonization of rules
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Peter Drucker, a management thinker, has argued that ‘the purpose of business is
to create and keep a customer’
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Most businesses recognize this fact and organize themselves accordingly
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The owners appoint a board of
directors to manage the business on their behalf, keeping in mind these three main tasks:
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monitoring and controlling the activities of the business
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The board
represents the most senior level of management, which then employs managers for a
particular part of the operations
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To achieve this, the needs of other groups connected with the business (employees,
suppliers, local community) cannot be ignored
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The way in which businesses operate in terms of honesty, fairness and
transparency with which they treat other user groups has become a key issue
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One way of demonstrating their commitment to
morality is to develop and adhere to a code of ethics concerning business behaviour
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Title: Introduction to Accounting
Description: A brief introduction into financial accounting.
Description: A brief introduction into financial accounting.