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Chapter 15 Using Management and Accounting Information, Accounting…
Chapter 15 Using Management and Accounting Information
Data VS Information
Data
–
numerical or verbal descriptions
that usually result from some sort of measurement
Examples: your current wage level, the current retail prices of Dell computers
Information
– data presented in a form that is useful for a
specific purpose
Example: a graph of average wages paid to men and to women
Management information system (MIS)
– a system that
provides managers and employees with the information
they need to
perform their jobs as effectively
as possible
The purpose of an MIS is to distribute timely and useful information from both internal and external sources to the managers and employees who need it.
5 management info systems functions
- every MIS must be tailored to the organization it serves and must perform 5 functions
Collects data
Stores data
Updates data
Processes data into information
Presents information to users
Accounting – the process of systematically collecting, analyzing, and reporting financial information
Not only can accounting information be used to answer questions about what has happened in the past, it can also be used to help make decisions about the future.
To improve the accuracy of a firm’s accounting information and its financial statements, businesses rely on audits conducted by accountants employed by public accounting firms.
Audit – an examination of a company’s financial statements and the accounting practices that produced them
The purpose of an audit is to make sure that a firm’s financial statements have been prepared in accordance with generally accepted accounting principles.
Generally accepted accounting principles (GAAPs) – an accepted set of guidelines and practices for U.S. companies reporting financial information and for the accounting profession global accounting standard
If an accountant determines that a firm’s financial statements present financial information fairly and conform to GAAPs, then he or she will issue the following statement:
“In our opinion, the financial statements … present fairly, in all material respects the financial position of the company … in conformity with generally accepted accounting principles.”
different types of accounting
Managerial accounting
– provides
managers and employees
with the information needed to make decisions about a firm’s financing, investing, marketing, and operating activities
Supports decision making
No formal standards
Financial accounting
– generates financial statements and reports
for interested people outside an organization
For the public (financial statements/ balance sheets)
Additional special areas of accounting include:
1 Cost accounting
– determining the cost of producing specific products or services
2 Tax accounting
– planning tax strategy and preparing tax returns for firms or individuals
3 Government accounting
– providing basic accounting services to ensure that tax revenues are collected and used to meet the goals of state, local, and federal agencies
4 Not-for-profit accounting
– helping not-for-profit organizations to account for all donations and expenditures
Accounting equation
Assets = Liabilities + Owners' Equity
Assets
– the resources that a business owns
Liabilities
– a firm’s debts and obligations
Owners’ equity
– the difference between a firm’s assets and its liabilities