Accounting for Managers
TOPIC A: AN INTRODUCTION TO ACCOUNTING
Investors – Individual and groups provide initial capital. Creditors – Company which loans money to another company (Suppliers/Bank). Managers – Oversee the day-to-day operations.
What is accounting?
* Process of Recognising, measuring, recording (also known as transactions), disclosing and attesting to information. *Information – Decision Making (Value Creation), Control (Monitoring).
Process of Accounting:
Transactions can be either external or internal.
External – Events with parties outside of business.
Internal – Events that take place within the business.
* Produces information for financial reporting to external decision-makers. * Produces managerial reports that are used within the company to make determinations about pricing, production, quality, and numerous other day-to-day activities.
Users of Financial Statements:
Investors – External
Customers – External
Lenders e.g. Banks
Government – Corporate Tax
The Public and Management– Polluting environment?
External users of accounting information – Individuals and other enterprises that have interest in the reporting enterprise but not involved in the day-to-day operations. External users of financial information – Owners, creditors, potential investors, labour unions, governmental agencies, suppliers, customers, trade associations, and the general public.
Objectives of external financial reporting range from general to most specific. * General – Provide information in making investment and credit decisions. * More Specific – Provide information in assessing the amount, timing and uncertainty of future cash flows * Most Specific – Provide information about economics resources, claims against those resources, and changes in the balance of resources and claims.
Three Primary Financial Statements:
* Balance sheet (also known as statement of financial position) – Shows the resources of a business and the claims against those resources, listing of all asset, liability and equity account balances that do not appear on income statement. * Income statement (also known as statement of operations or statement of comprehensive income) – Measures the revenues earned by company during a period of time and the expenses incurred to generate those revenues, profitability (to see whether company is making profits, profit loss and count). E.g. 1st Jan 2013 to 31st Dec 2013
* Statement of cash flows – Provides information about company receives cash and where it spends its cash, cash inflows and outflows over a period of time, all sources and uses of cash are listed. Three major sections of statement of cash flows:
* Operating activities
* Investing activities
* Financing activities
E.g. transaction over the one year, like buildings, manufacturing equipment and other assets
IFRS (International Financial Reporting Standards):
IFRS Foundation (formerly International Accounting Standards Committee [IASC] Foundation) * Supervisory body for IASB (International Accounting Standards Board). * 22 trustees.
* Responsible for governance issues and ensuring each body is properly funded.
Objectives of IFRS Foundation
* Develop a set of high quality, understandable and enforceable global accounting standards. * Help the world’s capital markets and other users make economic decisions through the requirements of high quality, transparent and comparable information in financial statements. * Promote using and applying these standards.
* Bring about the convergence of national and international accounting standards.
IFRS Advisory Council (formerly Standards Advisory Council [SAC]) * Provides forum for IASB to consult interested parties.
Objectives of IFRS Advisory Council
* Advising the IASB on agenda decisions and priorities in IASB’s work. * Informing the IASB of the...
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