PART 1
ACCOUNTING
UNIT1BasicAc
ounting
Chapter1IntroductiontoAcounting
1. 1Definition of Accounting
Acountingisoftendescribedasaserviceactivity.Itsfunctionistoprovidequantitative information，primarily financialin nature，about economic entities.The scope of ac
ounting includes first identifying economic events，then measuring，recording， summarizing，andreportingtheinformationtousers.Ac
ountingcoversasignificantlybroaderscopeofactivitiesthanbookke
ping.
Theprimaryusersareinvestorsand managers，butcreditors，government，labour unions，andthegeneralpublicalsouseac
ountinginformation.Financialstatementsreport ac
ountinginformationthatprovidesanswersto questionsaboutresources，earningprospects，expectedcashcol
ections，expensestobeincur
ed，debtGpayingability，tax col
ection，andnegotiatingwageagre
ments.
1. 2Profession of Accounting
Thedemandforac
ountingserviceshasincreasedwiththeincreaseinnumber，size andcomplexityofbusines
es.Inaddition，newlawsandregulationshavealsocreatedan increaseddemandforac
ounting.
Youmaywonderwhethertherearecare
ropportunitiesinac
ounting.Theansweris yes.Employmentopportunitiesintheprofes
ionofac
ountancyareexpectedtocontinueto growandexpand.InareportpreparedbytheU.S.DepartmentofLabor，theac
ountingprofes
ionisprojectedtoincreaseby39.8％ betwe
nthelate1980sandtheyear2000.
Acountantsareengagedineither (1)privateacountingor (2)publicacounting. Acountantsemployedbyabusines
firm oranotGforGprofitorganizationaresaidtobe engagedinprivateacounting.Acountantsandtheirstaf
whoprovideservicesonafe
basisaresaidtobeengagedinpublicac
ounting.
Experienceinprivateandpublicac
ountinghaslong be
nrecognizedasexcel
ent trainingfortopmanagementpositions.Manypositionsinindustry，andinstateandfederal agenciesareheldbyindividualswitheducationandexperienceinac
ounting.
1.PrivateAcounting
Thescopeofactivitiesand dutiesofprivateacountantsvaries widely.Ifprivate acountantsareemployedbya manufacturingfirmthey maybecal
edindustrialorcost acountants.Thechiefacountantinabusines
maybecal
edthecontrol er.Variousstate andfederalagenciesandothernotGforGprofitagenciesalsoemployac
ountants.
2.PublicAc
ounting
Inpublicac
ounting，anac
ountantmaypracticeasanindividualorasamemberofa publicac
ountingfirm.Publicac
ountantswhohavemetastate..seducation，experience， andexaminationrequirementsmaybecomeCertifiedPublicAc
ountants(CPAs).
TherequirementsforobtainingaCPAcertificatedif
eramongthevariousstates.Al
statesrequireacol
egeeducationinac
ounting，andmoststatesnowrequire150semester hoursofcol
egecredit.Inaddition，acandidatemustpas
atwoGdayexaminationprepared bytheAmericanInstituteofCertifiedPublicAc
ountants (AICPA).Howdif
icultisthe CPAexamination? Approximately30％ ofthecandidatespas
eachofthefourpartsofthe CPAexamination.Only10％to20％ pas
theentireexaminationatonetime.
3.SpecializedAc
ountingFields
You maythinkthatal
ac
ountingisthesame.However，you wil
findseveral specializedfieldsofac
ountinginpractice.Thetwomostcommonarefinancialac
ountingand managerial ac
ounting. Other fields include cost ac
ounting， environmental ac
ounting，internationalac
ounting，notGforGprofitac
ounting，andsocialac
ounting.
Financialac
ountingisprimarilyconcerned withtherecordingandreportingof economicdataandactivitiesforanentity.Althoughsuchreportsprovideusefulinformation formanagers，theyaretheprincipalreportsforowners，creditors，governmentalagencies， andthepublic.Financialac
ountantsfol
ow general
yac
eptedac
ountingprinciples (GAAP)inpreparingreportsforstockholdersandtheinvestingpublic.Theseprinciples ensurethatreportsfordif
erentcompaniescanbecompared.Forexample，theabilityto comparefinancialreportsises
entialforaninvestorwhoisdeciding whichcompanyto invest.
Managerialac
ounting，oftencal
ed managementac
ounting，usesbothfinancial ac
ountingandestimateddatatothe managementinrunningdayGtoGdayoperationsand planningfutureoperations.Managerialac
ountingcanprovidemanagerswithrelevantand timelyinformationandreports.Unlikefinancialac
ountants，managementac
ountantsare notrestrictedto using general
yac
epted ac
ounting principles.Instead，management ac
ountantsusethebasicprincipleofgatheringandreportinginformationthatisusefulto management.Thus，managerialreportscanwidelyof
erinformationandcontent
Managementac
ountantsareoftenconcernedwithidentifyingalternativeactio.nsand preparingreportsofevaluatingtheimpactofeachalternative.Forexample，thepresident ofacompanymightrequestananalysisofalternativeplansforfinancingtheconstructionof anewof
icebuilding.
1. 3Types of Accounting Information
Thetermsfinancialac
ounting，managementac
ountingandtaxac
ountingareoften usedindescribingthre
typesofac
ountinginformationthatare widelyusedinthe busines
community.
1)FinancialAc
ounting
Financial ac
ounting refers to information describing the financial resources， obligationsandactivitiesofaneconomicentity，eitheranorganizationoranindividual. Ac
ountant
