MBA 607 Course 1

MBA 607 – Financial Accounting

The Nature and Purpose of Accounting

Accounting Purpose and Process

1

MBA 607 – Financial Accounting

The Nature and Purpose of Accounting
1. The Need for Accounting Information
2. The Accounting Profession
3. Financial Statements

Accounting Purpose and Process

2

MBA 607 – Financial Accounting

1. The need for Accounting Information
A. Framework


Stakeholders (creditors, shareholders, regulators) in an entity require quantitative information on the financial performance and results of an entity to make economic decisions Accounting Purpose and Process

3

MBA 607 – Financial Accounting

1. The need for Accounting Information
A. Framework
 Accounting systems provide the required quantitative information on


The resources used by the entity

The means to finance the resources acquired or used 



The results achieved using the resources



Expressed in monetary terms

Accounting Purpose and Process

4

MBA 607 – Financial Accounting

1. The need for Accounting Information
B. Operating Information Systems



Operating information systems provide the required data for the purpose of


Financial accounting



Management accounting



Tax accounting

Accounting Purpose and Process

5

MBA 607 – Financial Accounting

1. The Need for Accounting Information
C. Financial Accounting


Financial accounting statutory reports
Income statement, balance sheet, cash flow statements 

 Financial

accounting information is

intended


Externally to shareholders, creditors, regulators



Internally to management and employees

Accounting Purpose and Process

6

MBA 607 – Financial Accounting

1. The need for Accounting Information
D. Management Accounting
Management accounting information is required to support management in their main functions



Planning – process of deciding what actions should be under-taken



Implementing – process to implement the plan’s specific actions and activities



Controlling – process