Financial Reporting Standards

Chapter 1

Overview of Financial Accounting

Introduction

The objective of accounting is to provide information useful for users’ decision making. Two primary areas of accounting are financial accounting and managerial accounting.1 Financial accounting is intended to provide information to “external” users in meeting their decision making needs and is the exclusive topic of this text. Unlike managers, external users are not involved in the day-to-day decision making within the firm, but need information in making decisions. The two key external user groups with the greatest financial interest targeted to benefit from financial accounting information are current and potential creditors and investors. Since this text assumes the corporate form ...