MGT8803 WEEK 1- INTRODUCTION TO
FINANCIAL ACCOUNTING | ACTUAL
2025-2026 EDITION | GUARANTEED
PASS
,
, lOMoAR cPSD| 61371432
Week 1: What is Financial Accounting?
Accounting is the Language of Business
Purpose of Financial Accounting: To provide meaningful quantitative financial information
regarding an entity’s activities to decision makers.
Decisions: should I buy stock in a company? Should I be an owner (what is meaningful
to make a well-informed decision)
What is it not? Taxes, not tax authorities, managerial accounting (the tools a manager uses to
run their business efficiently and effectively)
Who are these decision makers?
Demand for financial accounting information extends to numerous users that include:
• Shareholders (Owners) o Want to know if the business will be
successful and o What will I get out of this business?
▪ Stock prices go up
▪ Dividends
• Debt holders (Creditors) o People that lend money to a company
(bank or individual)
▪ Will I receive my interest payments (what is the appropriate interest rate?) ▪
Will I receive my principal back when it matures?
• Managers
o Won’t really use financial accounting information
o Care about keeping their jobs through keeping shareholders happy
• Investment analysts and information intermediaries o
Professional users of financial accounting who help shareholders
and debt holders make decisions
• Customers and strategic partners o Other people could use this
information
What Makes Information Useful?
• Relevance- Capable of making a difference to a decision maker o
Help a decision maker make a decision
• Faithful Representation- Dependable and reliable o Things that
match the economic reality of the business
Where Do Financial Accounting Rules (Standards) Come From?
The Constitution says that Congress has the power to regulate state trade between borders they
created the SEC (Security and Exchange Commission) – role is to regulate financial markets
1
FINANCIAL ACCOUNTING | ACTUAL
2025-2026 EDITION | GUARANTEED
PASS
,
, lOMoAR cPSD| 61371432
Week 1: What is Financial Accounting?
Accounting is the Language of Business
Purpose of Financial Accounting: To provide meaningful quantitative financial information
regarding an entity’s activities to decision makers.
Decisions: should I buy stock in a company? Should I be an owner (what is meaningful
to make a well-informed decision)
What is it not? Taxes, not tax authorities, managerial accounting (the tools a manager uses to
run their business efficiently and effectively)
Who are these decision makers?
Demand for financial accounting information extends to numerous users that include:
• Shareholders (Owners) o Want to know if the business will be
successful and o What will I get out of this business?
▪ Stock prices go up
▪ Dividends
• Debt holders (Creditors) o People that lend money to a company
(bank or individual)
▪ Will I receive my interest payments (what is the appropriate interest rate?) ▪
Will I receive my principal back when it matures?
• Managers
o Won’t really use financial accounting information
o Care about keeping their jobs through keeping shareholders happy
• Investment analysts and information intermediaries o
Professional users of financial accounting who help shareholders
and debt holders make decisions
• Customers and strategic partners o Other people could use this
information
What Makes Information Useful?
• Relevance- Capable of making a difference to a decision maker o
Help a decision maker make a decision
• Faithful Representation- Dependable and reliable o Things that
match the economic reality of the business
Where Do Financial Accounting Rules (Standards) Come From?
The Constitution says that Congress has the power to regulate state trade between borders they
created the SEC (Security and Exchange Commission) – role is to regulate financial markets
1
