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FINANCIAL ACCOUNTING
Dr. Muhammad Zubair Mumtaz
Associate Professor of Finance
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COURSE OUTLINE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Accounting: Information for Decision Making
Introduction to Financial Statements
The Accounting Cycle: Capturing Economic Events
The Accounting Cycle: Accruals and Deferrals
The Accounting Cycle: Reporting Financial Results
Accounting for Merchandising Activities
Inventories and the Cost of Goods Sold
Plant and Intangible Assets
Liabilities
Forms of Business Organizations
Stockholders Equity: Paid-In-Capital
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MARKS DISTRIBUTION
Mid term
50 marks
Final term
50 marks
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FINANCIAL & MANAGERIAL
ACCOUNTING
The Basis for Business Decisions
THIRTEENTH EDITION
Williams
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Haka
Bettner
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Chapter
1
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ACCOUNTING:
INFORMATION FOR
DECISION MAKING
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Definition of Accounting
Accounting is the art of recording, classifying
and summarizing in a significant manner and
in terms of
money, transactions and events
which are, in part at least, of a financial
character and interpreting the results thereof
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The
accounting
process
Economic
activities
Actions
(decisions)
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Accounting
“links” decision
makers with
economic
activities and
with the results of
their decisions.
Accounting
information
Decision
makers
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TYPES OF ACCOUNTING
INFORMATION
Tax
Financial
Managerial
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Information System
Information
Users
- Investors
- Creditors
- Managers
- Owners
- Customers
- Employees
- Regulators
- SECP
- SBP
- IRS
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Financial
Information
Provided
- Profitability
- Financial
position
- Cash flows
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Decisions
Supported
- Performance
evaluations
- Stock
investments
- Tax strategies
- Labor relations
- Resource
allocations
- Lending
decisions
- Borrowing
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BASIC FUNCTIONS OF AN
ACCOUNTING SYSTEM
Interpret and
record
business
transactions.
Payment
Car
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BASIC FUNCTIONS OF AN
ACCOUNTING SYSTEM
Interpret and
record
business
transactions.
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 Classify
similar
transactions
into useful
reports.
Summarize
and
communicate
information to
decision
makers.
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EXTERNAL USERS OF
ACCOUNTING INFORMATION
•Owners
•Creditors
•Labor unions
•Governmental agencies
•Suppliers
•Customers
•Trade associations
•General public
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(Specific)
Provide information about economic
resources, claims to resources, and
changes in resources and claims.
Provide information useful in
assessing amount, timing and
uncertainty of future cash flows.
Objectives
of
Financial
Reporting
Provide information useful in making
investment and credit decisions.
(General)
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OBJECTIVES OF EXTERNAL
FINANCIAL REPORTING
Balance Sheet
Income Statement
Statement of Cash Flows
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The primary
financial
statements.
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CHARACTERISTICS OF EXTERNALLY
REPORTED INFORMATION
A Means to
an End
Usefulness
Enhanced via
Explanation
Broader than
Financial
Statements
Based on
General-Purpose
Assumption
Historical in
Nature
Results from Inexact and
Approximate Measures
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USERS OF INTERNAL ACCOUNTING
INFORMATION
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 Board of directors
 Chief executive officer (CEO)
 Chief financial officer (CFO)
 Vice presidents
 Business unit managers
 Plant managers
 Store managers
 Line supervisors
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Typical Simple Organization Chart
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Board of
Directors
(Owners)
Chief Executive
Officer
(CEO)
Business Unit
Manager
Plant
Manager
Plant
Manager
Plant
Accountant
Plant
Accountant
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V.P. Human
Resources
V.P. Information
Services
Chief Financial
Officer (CFO)
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OBJECTIVES OF MANAGEMENT
ACCOUNTING INFORMATION
To help achieve
goals and missions
To help evaluate
and reward
decision makers
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CHARACTERISTICS OF
MANAGEMENT ACCOUNTING
INFORMATION
Timeliness
A Means to
an End
Identify
Decision
Maker
Measures of
Efficiency and
Effectiveness
Oriented
Toward
Future
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INTEGRITY OF ACCOUNTING
INFORMATION
Institutional Features
- Generally Accepted Accounting Principles (GAAP)
- Financial Accounting Standards Board
- Securities and Exchange Commission
- Internal Control Structure
- Audits
- Legislation
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INTEGRITY OF ACCOUNTING
INFORMATION
Professional Organizations
American Institute of Certified Public Accountants
Institute of Management Accountants
Institute of Internal Auditors
American Accounting Association
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INTEGRITY OF ACCOUNTING
INFORMATION
Competence, Judgment and Ethical Behavior
- Certified Public Accountants (CPAs)
- Certificate in Management Accounting (CMA)
- Certificate in Internal Auditing (CIA)
- Code of Professional Conduct
CPA
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INTEGRITY OF ACCOUNTING
INFORMATION
Careers in Accounting
- Public Accounting
- Management Accounting
- Governmental Accounting
- Accounting Education
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END OF CHAPTER 1
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