Interpreting

Reporting

e) To pass information on to other people.

f) To bring information together in one place

Put the words above in the most appropriate blank below. Use each word once.

1. Linda lives in the forest and tapes the sounds of bird calls for the university. What is Linda doing?

2. His manager has no scientific knowledge so Jack is explaining the results of the research in simple words so that the manager can understand.

What is Jack doing?

3. Phil has gone to America to get information on what rival firms are doing. What is Phil doing? ……………………………

4. Jenny has been working in Africa for 10 years. During this time she has arranged all African insects into 12 different classes.

What is Jenny doing? ......................................

5) The meeting is being held so Rick can explain the latest financial results to management.

What is Rick doing? ………………………..

6) Chris doesn't have time to tell everyone what she did on her business trip so she is writing the details in a brief two-page report.

What is Chris doing? …………………………..

People who need financial information

People who have an interest in an organization are called "interested parties".

Accounting provides information for the following purpose:

• Information that helps businesses make decisions

• Information that helps to determine responsibility

• Information that helps to control a company

• Information that helps all interested parties make their decisions

Discuss why you think the following interested parties need financial information on an

organization and then summarize your findings in the spaces below.

Managers ____________________________________________________________

____________________________________________________________

____________________________________________________________

Creditors

___________________________________________________

___________________________________________________

Potential investors__________________________________________________

__________________________________________________________________

Government _________________________________________________

_____________________________________________________________________________________

Interested parties can be within the organization (internal) or outside the organization (external). Make a list below of internal and external interested parties.

Internal _______________________________________________________________

External _______________________________________________________________

Creditor

A creditor is someone an individual or a company owes money to.

Potential investors

Potential investors are people who might put their money into an organization in the future

The Standardized Accounting System

Accounting practices are used for individuals and organizations all over the world_. In an international society it is very necessary that there are common practices used so that financial information can be understood anywhere. This is especially true in our globalized economy where people are free to invest in companies in most other countries. To do this potential investors need accurate and reliable information that they can understand and trust. Accounting practices are therefore standardized. The same principles and rules are used everywhere

Accountants

People who specialize in accounting are called accountants. There are three types of accountants.

a)

Public accountants

Public accountants set up their own businesses. They provide accounting services to companies and individuals. They have to gain experience and study hard for difficult exams in order to obtain the title of Certified Public

Accountant (CPA). Public accountants receive fees for their services.

b)Private accountants

Private accountants work for or are hired by private companies to look after the financial accounts of those companies.

c)Government accountants

Government accountants work for government agencies. They work in areas

such as taxation. Private and government accountants are paid by salary.

One of the main jobs of accountants is to examine or audit financial information. The accountant who does this work is called an auditor. Another important job of accountants is to work out the amount of tax an organization has to pay

To audit

To audit means to officially examine accounts.

Auditor

An auditor is a person who officially examines an organization's accounts.

Review Questions 1

Answer the following questions based on what you have studied so far.

a) Why is accounting called the 'language of business"?

______________________________________________________________

______________________________________________________________

b) What does the "standardized accounting system" mean?

______________________________________________________________

_____________________________________________________________

3. What is the difference between public and private accountants?

______________________________________________________________ ______________________________________________________________

d) What is a CPA?

__________________________________________________________

__________________________________________________________

e) What does an auditor do?

___________________________________________________________

___________________________________________________________

f) What is a potential investor?

___________________________________________________________

___________________________________________________________

7. What are the 6 processes carried out by accountants?

__________________________ _____________________

__________________________ _____________________

__________________________ _____________________

Give a name to the process that each person is carrying out.

h) Jane explains the action the company should take based on the latest financial Information. ______________________

i) Bill writes down all the transactions that take place each day. _______________________

j) Jack groups all transactions of the same type in a special book

_______________________

11. Sue explains to the managers what the sales figures for the year are.

___________________________________________

11. All sales figures for the day are stored in the

computer ___________________________________________

11. All the financial information for the accounting period is grouped together in special forms so that a company can easily understand its financial position

Transaction

A transaction is a single financial exchange for a good, a service or an obligation

Complete the following sentences by choosing the correct answer.

1) Accounting information is used by ... to help them make financial decisions.

1. managers

2. potential investors

3. creditors

4. all of the above

2) Regardless of the type of business or the amount of money involved^:

1. all companies use identical accounting systems

2. common procedures are used in handling financial information

3. no standardized accounting system is used.

3) Public accountants may earn the title of CPA by:

1. becoming governmental accountants

2. paying a fee

c) fulfilling difficult requirements

d) obtaining a Bachelor of Arts degree in accounting

4) Private and governmental accountants are paid on a…… basis.

1. Salary

2. monthly

3. fee

4. weekly

Companies

Company

A company is a legally recognized organization that makes, buys and sells goods or provides services for a profit.

Once a company is registered under the Companies Act it must comply with the act and it becomes a separate legal entity. This means that it has its own legal existence, separate from that of the owners. A new company is like an empty box. There is nothing in it at first and anything that goes into it must go out again at some time. A company is not the owner - it is a separate entity. If the owners or shareholders put money into the company the company has a legal obligation to pay it back.