Financial Accounting for Decision Makers

Accounting information
■ 
Accounting is part of the total information system within a business. It shares the fea-
tures that are common to all information systems within a business, which are the 
identification, recording, analysis and reporting of information.
Management accounting and financial accounting
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Accounting has two main strands – management accounting and financial accounting.
■ 
Management accounting seeks to meet the needs of the business’s managers, and 
financial accounting seeks to meet the needs of owners and lenders, but should also 
be of use to other user groups.
■ 
These two strands differ in terms of the types of reports produced, the level of report-
ing detail, the time orientation, the degree of regulation and the range and quality of 
information provided.
The changing face of accounting
■ 
Changes in the economic environment have led to changes in the nature and scope of 
accounting.
SUMMARY
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Financial accounting has improved its framework of rules and there has been greater 
international harmonisation of accounting rules.
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Management accounting has become more outward looking, and new methods 
for managing costs have been developed to help a business gain competitive 
advantage.
What is the purpose of a business?
■ 
The purpose of a business is to create and keep customers.
What kinds of business ownership exist?
There are three main forms of business unit:
■ 
sole proprietorship – easy to set up and flexible to operate, but the owner has unlim-
ited liability;
■ 
partnership – easy to set up and spreads the burdens of ownership, but partners 
usually have unlimited liability and there are ownership risks if the partners are 
unsuitable;
■ 
limited company – limited liability for owners, but obligations are imposed on how a 
company conducts its affairs.