CHAPTER
1
Accounting—Present and Past
CHAPTER OUTLINE:
I. What Is Accounting?
A. Definition
B. Uses of Accounting Information
C. Classifications
2. Managerial Accounting / Cost Accounting
4. Internal Auditing
6. Income Tax Accounting
II. How Has Accounting Developed?
A. Early History
B. The Accounting Profession in the United States
C. Financial Accounting Standard Setting at the Present Time
1. Financial Accounting Standards Board
1. Managerial Accounting / Cost Accounting
3. Governmental and Not-for-Profit Accounting
4. Income Tax Accounting
E. International Accounting Standards
F. Ethics and the Accounting Profession
III. The Conceptual Framework
A. Context
B. Summary of Concepts Statement No. 8, Chapter 1 — The Objective of General Purpose
IV. Plan of the Book
A. Resources for Students
Chapter 1 Accounting—Present and Past
TEACHING/LEARNING OBJECTIVES:
Principal:
2. To identify and describe different classifications of accounting.
3. To emphasize that financial accounting standards are not a “fixed code of rules,” but are
5. To summarize how accounting has evolved over time.
7. To introduce the issues associated with the development of international accounting
standards.
9. To summarize Concepts Statement No. 8, Chapter 1 — The Objective of General Purpose
Financial Reporting.
10. To relate the objectives of financial reporting for nonbusiness organizations to those of
business enterprises.
TEACHING OBSERVATIONS/ASSIGNMENT SUGGESTIONS:
1. Students should be put on notice about the jargon of accounting, the use of synonymous
2. When discussing “Auditing — Public Accounting,” have students find the auditors’ opinion
3. Discuss the Summary of Concepts Statement No. 8, Chapter 1 — The Objective of Financial
4. Assign Exercise 1-1. Encourage students to experiment with websites that are of interest. In
Exercise 1-7 concerning audit independence standards.
SOLUTIONS:
E1.3.
This exercise provides an opportunity to gauge where the students are in terms of
E1.4.
This exercise provides an opportunity to align student and instructor expectations.
For first-time instructors in this course, or for those having a diverse student
E1.5.
The principal factors Jim Hurley must consider are his competence and
independence. Is he competent to prepare financial statements for a company
that operates in a different industry than the one in which he works? Accepting a
E1.6.
Suggested discussion strategy:
Q: Why does a business have value?
A: It provides the owners an opportunity to earn a profit, an opportunity for
personal fulfillment from being in charge, and an opportunity to provide a
product or service that is useful to others.
Q: How can this value be measured?
Note: This exercise also provides an opportunity to point out some of the basic
limitations of the data provided by the accounting process (e.g., historical cost
information — how useful are past earnings results in predicting future earnings
and cash flows?). Be careful not to get too carried away with details. Let the
E1.8.
Answers will vary depending on the company selected. Note that requirement d