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Accounting and Finance for Non-Specialists
10th Edition Summary/Notes

Chapter 1 – Introduction to Accounting and Finance
The purpose of accounting is to collect, analyse and communicate financial information effectively and
use this information to make better, more informed decisions
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This includes
analysing the costs and benefits of different forms of finance
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1, pg3) and each
has their own reason for needing it:
Owners (Shareholders) – Will make decisions on selling or buying more shares depending on the
information provided in the financial statements
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Employees/Trade Unions – Can see how secure their job is based on the financial health of the
company
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Government – To ensure the correct level of tax is being paid
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Community Representatives (Local Council) – May consider financial performance if a company who
wishes to expand submits a planning application
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Lenders – How financially secure the company is when lending them money
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Managers – to determine how well the company is performing
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Managers may receive bonuses for hitting certain targets
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Qualities of Good Accounting Information
Figure 1
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It separates the fundamental qualities (relevance
and faithful representation) from the enhancing qualities
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Information must
be related to the decision that is being made
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Faithfully Represented – Information should be as accurate as possible
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Any changes in the way information is
prepared must be disclosed
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An independent body checks the information to ensure that it is
faithfully represented
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The later it is, the less useful it becomes
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It needs
to be understood by all who will need to use it
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Nowadays, accounting software is widely used to improve efficiency but also
comes with its own set of problems (Hacking, fraud, security, privacy etc
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Financial Accounting is
used externally, to help outside users make decisions
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These are
outlined below but are also in an easy-to-read chart on Figure 1
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Nature of Reports – FA produces general purpose reports to be used by a variety of users
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Level of Detail – FA has a wide overview of the business
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Regulations – FA must follow international accounting standards
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Reporting interval – FA statements are usually produced every year or 6 months
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Time Orientation – FA statements are historical reports (reports are produced for the previous
year
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Range and Quality of Information – FA uses monetary data with emphasis on the accuracy
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The Changing Face of Accounting
These days, the business environment is changing rapidly and become more competitive
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This has meant that the accounting profession has had to change and
develop itself
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This ensures
that financial reports are easily interpreted and ensure information is shown more faithfully
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Now it is
essential to consider outside factors (such as competitors and customers) to remain competitive
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Why Do I Need to Know Anything About Accounting and Finance?
It is an essential topic for any business student as accounting and finance information is integral to the
business operations
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Therefore, all managers within a business will need to be
able to interpret financial reports to make the best decision
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However, it is also important to care for other stakeholders in the
business, such as employees and customers
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Shareholders also require a balance between risk and return
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The banking crisis shows what can
happen is from too many risks are taken: the collapse of the entire sector
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Although they do not have
the aim to make a profit for shareholders, they still require accounting information in order to make
decisions

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