Business and Accounting
Types of Businesses |
3 types of businesses operate for profit |
SERVICE |
Ex: Delta Airlines - transportation services, Walt Disney - entertainment services. |
MERCHANDISING |
Ex: Wal-Mart - general merchandise, Amazon.com - internet books, music and videos |
MANUFACTURING |
Ex: General Motors Corporation - cars, trucks, vans, Dell Inc. - personal computers |
What is Accounting? |
Defined as an information system that provides reports to users about the economic activities and conditions of a business. |
The Role of Accounting |
To provide information for managers to use in operating a business. |
In the Language of Business |
Accounting serves as the means through which business financial information is communicated to users. |
Process of Providing Information |
- Identify user |
- Assess user's information needs |
- Define the accounting system to use |
- Record economic data |
- Prepare accounting reports |
Users of Accounting |
Internal: Managers employees |
External: Customers, creditors, investors, government |
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Uses of Accounting
Internal Uses of Accounting |
Branch: Management Accounting |
Objective: To provide timely information for managers to make decisions within the business. |
Information is sensitive and includes the customer, prices and plans to expand the business. |
External Uses of Accounting |
Branch: Financial Accounting |
Objective: To provide timely information for users to make decisions outside of the business. |
Information here is useful for creditors and lenders who look at financial reports on operations and conditions of a business. |
General-purpose financial statements are one type of financial reports. |
Opportunities in Accounting
PRIVATE ACCOUNTING |
Employed by companies, government and not-for-profits. |
Careers: Bookkeeper, Payroll Clerk, General Accountant, Budget Analyst, Cost Accountant, Internal Auditor, Information Technology Auditor |
Certifications: Certified Payroll Professional (CPP), Certified Management Accountant (CMA), Auditor (CIA), Certified Information System Auditor (CISA) |
PUBLIC ACCOUNTING |
Employed individually or as a member of a public accounting firm in tax or audit services. |
Careers: Local firms, Public firms |
Certifications: Certified Public Accountant (CPA) |
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Ethics in Accounting
Unethical Practices in Accounting |
Failure of Individual Character |
Pressure from supervisors to meet company's expectations leads to small violations that adds up. |
Culture of Greed and Ethical Indifference |
Senior managers set the culture and can create indifference and greed to the truth. |
Guideline For Ethical Conduct |
1. Identify an ethical decision by using honesty and fairness |
2. Identify the consequences and it's effects on others |
3. Consider your obligations and responsibilities to the affected |
4. Make a decision that is ethical and fair |
Sarbanes-Oxeley Act passed in 2002 (SOX) to oversee the accounting profession through the Public Accounting Oversight Board (PCAOB). |
Accounting and Business Frauds |
- Aldelphia Communications |
- American International Group (AIG) |
- American Online Inc. and PurchasePro |
- Computer Associates International Inc. |
- Enron |
- Fannie Mae |
- HealthSouth |
- Qwest Communications International Inc. |
- Tyco International Ltd. |
- WorldCom |
- Xerox Corporation |
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