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ACC 201: ESSENTIALS OF ACCOUNTING

YOUR NAME: _PETER LEVCHUCK________________


Please write extra notes in red ink.

What is the Professor Thevaranjans teaching philosophy?


Teaching is sowing thought into the minds and desires into the hearts
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?


Forget what we read Students often forget what they read
Remember what we write Tuesday Class Notes (10% for completing notes + 10% for
good notes/extra notes) Due Tuesday after Lecture
Understand what we do Thursday Homework (10% from video lecture on Blackboard
+ 30% from graded assignments) Due Thursday @ 11:59 PM
Internalize what we grasp Clicker Questions (10% + 30%)
Take away what we value Business Plan & Excel Skills (2 graded homework 20%)

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 quantifiable information useful for decision-making.

2. WHAT IS FINANCIAL ACCOUNTING (F/A)?


Financial Accounting focuses on outside decision-makers such as investors, lenders,
customers and suppliers.
It provides them with financial statements (F/S) in the form of balance sheets, income
statement and cash flow statements.

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.

4. WHAT ARE OTHER DIFFERENCES BETWEEN FINANCIAL AND MANAGERIAL


ACCOUNTING?

FINANCIAL ACCOUNTING MANAGERIAL ACCOUNTING


Believability and comparability Believability and comparability of M/A information are
of F/A information are two main concerns of less of a concern for managers.
outsiders.

F/S must be prepared in accordance with GAAP M/A Reports do not have to follow any rules
:
G = Generally
A = Accepted
A = Accounting
P = Principles

Publicly traded companies must have their F/S Managerial Accounting Reports do not have to be
verified by auditors. audited.

Certified Public Accountants (CPA) 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 M/A is more concerned with Cost Behavior:
: As such with fixed costs and variable (marginal) costs.
As such with average costs and inventory valuation.

F/A will be useful to you as a future investor. M/A will be useful to you as a future manager.

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.

6. WHO IS AN ENTREPRENEUR?
A person who organizes and manages 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
Financial Statements Outside decision makers Financial Accounting
+ Concepts Inside decision makers Managerial Accounting

9. THE LANGUAGE VIEW OF ACCOUNTING

Accounting: Trunk
Marketing: Branch
Finance: Branch
Operations: Branch
Strategy: Branch