Chapter Opener: Thinking Critically Fast Facts • • • • Managerial Implications: Thinking Critically Discussion Questions 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. CHAPTER 1 ACCOUNTING: THE LANGUAGE OF BUSINESS Google’s mission is to organize the world’s information and make it universally accessible and useful. “Googol” is the mathematical term for a 1 followed by 100 zeros. Google’s play on the term reflects the company’s mission to organize the immense amount of information available on the web. Google’s interface can be customized into more than 100 languages. Note to instructor: These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. The purpose of the Public Company Accounting Oversight Board is to oversee the accounting profession through its investigative and enforcement powers and to discipline corrupt accountants and auditors. Sole proprietorship (owned by one person). Partnership (owned by two or more people). Corporation (can be owned by one person or many). SEC, AICPA, AAA. Establish accounting policies, direct the accounting system, prepare and interpret financial statements, provide financial advice, prepare tax forms. The Public Company Accounting Reform and Investor Protection Act of 2002 was passed in response to the wave of corporate accounting scandals starting with the demise of Enron Corporation in 2001, the arrest of top executives at WorldCom and Adelphia Communications Corporations, and ultimately, the demise of Arthur Andersen, an international public accounting firm. Managers use financial information to make decisions about adding new products and services, offering current products and services, and choosing vendors. Public, managerial, and governmental. Statements of Financial Accounting Standards. Measure business performance; separate entity. Auditing, tax, and management advisory services. Advice on how to structure financial affairs in order to reduce taxes without violating tax laws. Google’s culture is unlike any in corporate America—lava lamps and large rubber balls dot company headquarters and the company’s chef used to cook for the Grateful Dead. Google Inc. puts employees first when it comes to daily life in all of their offices. Regulation of financial reporting by publicly owned corporations. Owners and managers: evaluate operations. Suppliers: assess ability of a firm to pay debts. Banks: ability to repay loans. Tax authorities: determine a tax base. Governmental agencies: legal compliance. Employees: wage levels and profit-sharing plans. A basic understanding of accounting would assist in the interpretation and analysis of financial statements released by a company like Google and would therefore make the financial position of the company more clear and a decision to purchase (or not purchase) its stock more straightforward.