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Chapter 1 - Introduction (C.17)

The document discusses key concepts in management accounting and financial accounting. It compares the two fields and outlines their differences. It also reviews four major financial statements and financial accounting concepts. Key differences between management and financial accounting are planning and decision-making versus compliance. Financial statements and accounting concepts like the income statement, statement of owner's equity, balance sheet, and statement of cash flows are also examined.

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12 views

Chapter 1 - Introduction (C.17)

The document discusses key concepts in management accounting and financial accounting. It compares the two fields and outlines their differences. It also reviews four major financial statements and financial accounting concepts. Key differences between management and financial accounting are planning and decision-making versus compliance. Financial statements and accounting concepts like the income statement, statement of owner's equity, balance sheet, and statement of cash flows are also examined.

Uploaded by

minh.tran200115
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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CHAPTER 1

INTRODUCTION

VNUK – IBM
TIEN VO
LEARNING OBJECTIVES

1. Understanding management accounting concepts

2. Compare financial accounting & management accounting

3. Review key Financial Statements and Financial

Accounting concepts
LO 1 - ACCOUNTING CONCEPTS

Accounting is the process of recording

information about the activities of an

entity, processing and communicating

this information to the users.


MANAGEMENT CONCEPTS
 Planning: determining organisational goals and means for achieving them

 Organising: deciding where decisions will be made, who will do what jobs

 Leading: inspiring and motivating employees to work hard

 Controlling: measuring & evaluating overall performance


MANAGEMENT ACCOUNTING

 Management accounting involves the process of

preparing and analysing information to support the

purpose of planning, organising, leading and controlling.


LO 2 - FINANCIAL VS. MANAGERIAL ACCOUNTING

Financial accounting involves recording past transactions in monetary

terms

and presents under the accounting standards and applicable laws.

Management accounting involves analysing and preparing financial/non-

financial information that supports the manager's decision-making process.


Financial vs. Managerial Accounting
Exercise 1
Indicate whether each of the following characteristics relates to managerial
accounting (MA) or financial accounting (FA)

a. Forward looking
b. Publicly reported
c. Complies with accounting standards
d. Usually confidential
e. Reports past performance
f. Uses physical measures as well as monetary ones for reports
g. Driven by user needs
h. Focuses on business decision making
LO 3 - FINANCIAL ACCOUNTING
REVIEW
 Four major financial statements : the income statement, the statement of
owner’s equity, the balance sheet, and the statement of cash flows.
THE INCOME STATEMENT
 The income statement summarizes the revenues earned and expenses incurred
by a business over an accounting period.
THE STATEMENT OF OWNER’S
EQUITY
 The statement of owner’s equity shows the changes in owner’s equity over an
accounting period.
THE BALANCE SHEET (SFP)

The purpose of a balance sheet is to show the financial position of a business on a


certain date, usually the end of a month or year.
THE STATEMENT OF CASH FLOWS

The statement of cash flows focuses on liquidity, that is, balancing the inflows
and outflows of cash to enable the business to operate and pay its bills when they
are due.

 The statement of cash flows is organized according to three major business


activities:
 Cash flows from operating activities
 Cash flows from investing activities
 Cash flows from financing activities
©2014 CENGAGE LEARNING. ALL RIGHTS RESERVED. MAY NOT BE SCANNED,
COPIED OR DUPLICATED, OR POSTED TO A PUBLICLY ACCESSIBLE WEBSITE, IN
WHOLE OR IN PART.
Relationships Between Statements

• Order of preparation of statements


Exercise
Exercise

Complete the following financial


statements by determining the
amounts that correspond to the letters.
(Assume no new investments by
owners.)
Exercise

Randall Company engaged in activities during the first year of its operations that
resulted in the following: service revenue, $4,800; expenses, $2,450; and
withdrawals, $410.
In addition, the year-end balances of selected accounts were as follows: Cash,
$1,890; Other Assets, $1,000; Accounts Payable, $450; and Owner’s Capital, $2,440.
Prepare Randall’s income statement, statement of owner’s equity, and balance sheet
(assume the year ends on December 31, 2014)
LO 3 – Financial Accounting Concepts
• Economic Income vs. Accounting Income

• Accrual Accounting Concepts:


- Revenue is recorded when earned
- Expense is recorded when used/incurred

• Revenue Expenditure (I/S) vs. Capital Expenditure (B/S)


Exercise 1
Determine whether each of the following transactions related to an office building is a
revenue expenditure (RE) or a capital expenditure (CE).

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