Introduction to Business Accounting and Finance

Transcript:Introduction to Business Accounting and Finance:
Introduction to Business Accounting and Finance Module Learning Outcomes Recognize sound accounting practices, and use financial statements and accounting principles to make informed judgements about an organization’s financial health 16.1: Define accounting, and explain its role as a form of business communication 16.2: Identify key financial statements and their components, and explain the primary use of each type of payment 16.3: Calculate the break-even point, where profit will be equal to $0, using information from financial statements 16.4: Use financial statements to calculate basic financial ratios to measure the profitability and health of a business 16.5: Discuss the importance of ethical practices in accounting and the implications of unethical behavior Accounting in Business Learning Outcomes: Accounting in Business 16.1: Define accounting, and explain its role as a form of business communication 16.1.1: Explain the role of accounting as a form of business communication 16.1.2: Identify the users and uses of financial accounting 16.1.3: Identify the users and uses of managerial accounting Class Discussion: Why Accounting? Understanding Accounting in Business Accounting is the measurement and communication process used to report on the activities of profit-seeking business organizations. It is the language of business. Accounting represents all of the financial transactions of a business in a format that can be interpreted and understood by both internal and external stakeholders. Internal and External Users Users of accounting information are separated into two groups, internal and external. Internal users are the people within a business organization who use accounting information. For example, the human resource department needs to have information about how profitable the business is in order to set salaries and benefits. Likewise, production managers need to know if the business is doing well enough to afford to replace worn-out machinery or pay overtime to production workers. External users are people outside the business entity that use accounting information. These external users include potential investors, the Internal Revenue Service, banks and finance companies, as well as local taxing authorities. Uses of Financial Accounting Financial accounting information appears on financial statements that are intended primarily for external use. Financial accounting relates to the company as a whole. Stockholders and creditors are two outside parties who need financial accounting information. These two parties make decisions pertaining to the entire company, such as whether to increase their investment in the company or to extend credit to the company. GAAP and Tax Accounting Financial accountants adhere to