Accounting Principles and System Influences

Accounting

Definition and Purpose

Accounting aids decision-making by recording, classifying, and summarizing business operations to interpret their results.

Accounting Information

Accounting information enables organizations to achieve their goals and objectives through informed decision-making.

Accounting Information Users

Internal Administration

Internal users prepare, analyze, and communicate accounting information to help managers achieve company objectives.

External Actors

External users, such as investors, shareholders, banks, and government agents, use accounting information for decision-making.

Bookkeeping

Bookkeepers collect and classify data, allowing internal and external stakeholders to verify organizational performance.

Reports: Efficiency and Opportunities

Reports help administrators focus on operational problems and compare results with expectations.

Problem Solving

Problem-solving involves studying possible courses of action and recommending the best option.

Influences on Accounting Systems

Accounting System

An accounting system collects, organizes, and communicates information about an organization's activities.

Generally Accepted Accounting Principles (GAAP)

GAAP is a set of standards that public companies must follow when issuing financial statements.

Foreign Corrupt Practices Act (FCPA)

The FCPA prohibits U.S. companies from engaging in bribery and corruption, requiring detailed and accurate accounting records and a system of internal controls.

Internal Controls

Internal controls are policies that protect and optimize company assets.

Administrative Auditing

Administrative auditing ensures that administrators implement policies and procedures specified by senior management.

Sarbanes-Oxley Act (SOX)

The 2002 Sarbanes-Oxley Act requires professional oversight of a company's accounting processes.

Cost-Effectiveness and Performance Considerations

Cost-Benefit Balance

Choosing accounting methods and systems involves weighing estimated costs against potential benefits.

Impact on Behavior

Accounting systems can influence executive decision-making.

Administration and the Accounting Process: Nature of Planning

Choices

Choices are purposeful selections made from alternative actions to achieve a goal.

Basic Types of Planning

Planning Decisions

Planning decisions establish organizational objectives and how to achieve them.

Control Decisions

Control decisions implement plans and use feedback to achieve objectives.

Management by Exception

Management by exception focuses on areas that deviate from the plan, ignoring those presumed to be progressing adequately.

Budget

A budget is a quantitative expression of an action plan that helps coordinate and implement the plan.

Performance Reports

Performance reports provide feedback by comparing results with plans, emphasizing variations.

Variations

Variations represent deviations from plans.

Product Life Cycle

The product life cycle encompasses the stages a product goes through, from conception and development to market introduction, maturity, and retirement.

Ethics

Acting ethically involves responsibility and ensuring information reliability.

Characteristics of Non-Profit Organizations

Non-profit organizations typically have labor-intensive work, difficulty allocating output, and limitations in storing service inputs and outputs.