The Information of Different Needs of Different User Groups Vary

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Introduction to accounting

Introduction n this opening chapter we begin by considering the role of accounting.
We shall see that it can be a valuable tool for decision-making. We shall identify the main users of accounting and financial information and discuss the ways in which this information can improve the quality of decisions that those users make.
We shall then go on to consider the particular role of financial accounting and the differences between financial and management accounting. Since this book is concerned with accounting and financial decision making for private-sector businesses, we shall also examine the main forms of business enterprise and consider what are likely to be the key objectives of a business.

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Learning outcomes
When you have completed this chapter, you should be able to:
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explain the nature and roles of accounting;

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identify the main users of financial information and discuss their needs;

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distinguish between financial and management accounting;

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explain the purpose of a business and describe how businesses are organised and structured.

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CHAPTER 1

INTRODUCTION TO ACCOUNTING

What is accounting?
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Accounting is concerned with collecting, analysing and communicating financial information. The purpose is to help people who use this information to make more informed decisions. If the financial information that is communicated is not capable of improving the quality of decisions made, there would be no point in producing it.
Sometimes the impression is given that the purpose of accounting is simply to prepare financial reports on a regular basis. While it is true that accountants undertake this kind of work, it does not represent an end in itself. The ultimate purpose of the accountant’s work is to give people better financial information on which to base their decisions.
This decision-making perspective of accounting fits in with the theme of this book and shapes the