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Summary summaries FM
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Summary Financial & Managerial Accounting, ISBN: 9781337119207 Financial Management 1
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Summary Financial Management
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By: davecas2004 • 1 year ago
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Chapter 1Accounting system
assets= liabilities + equity
Nature of business and accounting
A business is an organization in which basic resources are assembled and processed to provide
goods and services to customers. The objective of most businesses is to earn a profit. Profit is the
difference between the amounts received from customers and the amount paid for the inputs used
to provide the goods and services.
Types of businesses
Service businesses: provide services rather than products to customers (entertaining
services or transportation services)
Merchandising businesses: sell products they purchase from other businesses to sutomers
(Walmart and amazon)
Manufacturing businesses: change basic inputs into products that are sold to customers
(cars, trucks, personal computers)
Role of accounting in business
The role of accounting in business is to provide information for managers to use in operating the
business. Accounting also provides information to other users in assessing the economic
performance and condition of the business. Accounting can be defined as an information system
that provides reports to users about the economic activities and condition of a business. The
process by which accounting provides information to users is as follows:
1. Identify users
2. Assess users’ information needs
3. Design the accounting information system to meet users’ needs
4. Record economic data about business activities and events
5. Prepare accounting reports for users
Managerial accounting
Internal users of accounting information include managers and employees. The area of
accounting that provides internal users with information is called managerial accounting. The
objective of managerial accounting is to provide relevant and timely information for managers’
and employees’ decision-making needs. Managerial accountants' employees by a business are
employees in private accounting.
Financial accounting
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