Completion of Accounting Chapter Summaries

ACC 201: Essentials of Accounting

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Please write extra notes on the margins.

What is the Professor Thevar’s teaching philosophy?

Teaching is sowing thoughts into the minds and desires into the heart of the students.

If done well, these seeds of thoughts and desires can become fruit bearing trees over time.

What will it take for teaching to become a fruit bearing exercise?

F - Forget what we read

No required text

R - Remember what we write

Tuesday Class Notes (10% + 10%)

** two out of all the submissions will randomly be graded (looking for personal notes and thoughts)**

U - Understand what we do

“Play the game:

Homeworks strictly due on Saturday Midnight (10 required out of 13)

Thursday Homework (10% + 10%)

Guide us through homework in class!

Do all ten homeworks as if they are going to be graded, but two will be randomly chosen and graded

I - Internalize what we grasp

Clicker Questions (10%) and the two quizzes (20%)

T - Take away what we value

Have passion behind your business and business plan

= F R U I T

Chapter 1: Why Is Accounting Essential for an Organization?

1. What is Accounting?

· Accounting is a set of activities that translates day to day business transactions into information useful for decision making .

· Accounting translates this into quantifiable information that is useful for decision making

· Decision making is extremely important to accounting

· It is important to be able to influence decisions and know what information is necessary to do so

2. What is Financial Accounting (F/A)?

· Financial Accounting focuses on outside decision-makers such as investors, lenders, customers and suppliers.

· Focus on the customer’s decisions!

· Reflectively listen

· It provides them with financial statements (F/S) in the form of balance sheet, income statement and cash flow statement.

3. What is Managerial Accounting (M/A)?

· Managerial Accounting focuses on inside decision-makers , namely managers.

· It augments information in financial statements with concepts that can enhance managerial decisions.

· Focuses on insider decision making not outside

· We are looking to make good managerial decisions as managers

4. What are other Differences Between Financial and Managerial Accounting?

Financial Accounting	Managerial Accounting
Believability and comparability of F/A information are two main concerns of outsiders.	Believability and comparability of M/A information are less of a concern for managers.
F/S must be prepared in accordance with GAAP: G = Generally A = Accepted A = Accounting P = Principles Comparing becomes difficult with rules made by individuals	M/A Reports do not have to follow any rules.
Publicly traded companies must have their F/S verified by auditors.	Managerial Accounting Reports do not have to be audited.
Certified Public Accountants (CPA) Certify that people used to specific rules required	Certified Management Accountants (CMA)
F/A is backward looking (historical).	M/A is more forward looking (futuristic).
F/A is more concerned with Cost Assignment: As such with average costs and inventory valuation.	M/A is more concerned with Cost Behavior: As such with fixed costs and variable (marginal) costs.
F/A will be useful to you as a future investor.	M/A will be useful to you as a future manager.

F/A is backwards looking, audited by CPAs. F/A focuses on the past “What happened in the past year?”. Statistical historic information. M/A is all about future and statistical estimates.

5. Why is Accounting Essential for an Organization?

· Accounting is essential for business because without it investors will make poor investment decisions and banks poor lending decisions leading to an inefficient allocation of capital.

· Similarly, managers will make poor purchasing, production and marketing decisions leading to inefficient use of resources and labor.

· The most important resource is human resource!

6. Who is an Entrepreneur?

· A person who organizes and manages any any enterprise, especially a business, usually with considerable initiative and risk .

7. Why is Accounting Essential for an Entrepreneur?

· Accounting is essential because an entrepreneur is both an investor and a manager.

8. Accounting in a Picture

Data: day to day business transactions

Accounting: a set of activities

Information: useful for decision makers

Accounting is the trunk of the business tree, marketing is a branch, finance is a branch, operations is a branch, strategy is a branch!

Financial Statements ( Outside decision makers ( Financial Accounting + Concepts ( Inside decision makers ( Managerial Accounting

9. The Language view of Accounting