Business and Accounting
Types of Businesses
3 types of businesses operate for profit
Ex: Delta Airlines - transportation services, Walt Disney - entertainment services.
Ex: Wal-Mart - general merchandise, Amazon.com - internet books, music and videos
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
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
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)
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)
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.
- Fannie Mae
- Qwest Communications International Inc.
- Tyco International Ltd.
- Xerox Corporation