1.1 What is accounting?

Accounting is the collection and aggregation of information for decision makers - including managers, investors, regulators, lenders, and the public The overall objectives of et al, 1991): 1) To provide information ions. 2) To allow investors and y of cash flows. 3) To provide information on those resources. 4) To provide information 5) To provide information al resources. 6) To provide information nsibility to owners and the public. a firm s financial accounting statements are: (Stickney useful for making rational investment and credit decis creditors to assess the amount, timing, and uncertaint about the economic resources of a firm and the claims about a firm s operating performance during a period. on how a firm obtains and uses money and other financi on how management has discharged its stewardship respo

Principal Financial Accounting Statements. --Balance Sheet Balance Sheets present a snapshot of the investing and financing activities of a firm at a particular moment in time (usually the last day of the firm s fiscal year). The balance sheet presents a summary of the firm s assets, liabilities and shareholder s equity. In a balance sheet the sum of the assets must equal the sum of the liabilities and shareholder s equity. There are strict guidelines governing the estimation of assets and liabilities. --Income Statement The Income Statement presents the results of the operating ac tivities of a company for a specific period of time - usually the fiscal year. The statement summarized the revenues and expenses and reveals the net income or earnings of the firm during the period of time covered. --Cash Flow Statement The Cash Flow Statement shows the net cash flows related t o operating, investing, and financing activities for a specific period of time - usually the firm s fiscal year. General Cost classifications --Variable Costs Variable costs change in total in proportion to the level of activity. For example if a carmakers production increases by 5%, its tire costs will increase by about 5%. --Fixed Costs A fixed cost remains unchanged in total as the level of activity varies. For example, the property tax on a rental apartment is the same regardless of the number of building occupants. --Direct Costs A direct cost is the cost of direct labor and material used in making the product or delivering the service. --Indirect Costs/Overhead Costs Indirect costs are costs of an activity which ar e not easily associated with the production of specific goods or services. --Opportunity Costs The benefit that is sacrificed when the choice of one action precludes an alternative course of action. --Sunk Costs Costs that have been incurred in the past and cannot be changed by current actions.

What Does Cost Accounting Mean? A type of accounting process that aims to capture a company's costs of productio n by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment. Cost accounting will first measure a nd record these costs individually, then compare input results to output or actu al results to aid company management in measuring financial performance. Investopedia explains Cost Accounting While cost accounting is often used within a company to aid in decision making, financial accounting is what the outside investor community typically sees. Fina ncial accounting is a different representation of costs and financial performanc e that includes a company's assets and liabilities. Cost accounting can be most beneficial as a tool for management in budgeting and in setting up cost control programs, which can improve net margins for the company in the future. The purpose of cost accounting is to enable management to get as for as possible the exact cost of goods manufactured or services rendered, to furnish necessary facts and figures for adequate and effective managerial control and to provide management data necessary to determine output and products that will result in m ost profitable operations. The purpose of cost accounting is to assess the profi tability of a product or services, a department or the organization.