Business Accounting author Joe Ben Hoyle, C. J. Skender

Chapter 1

What Is Financial Accounting, and Why Is It Important?
Video Clip
(click to see video)
In this video, Professor Joe Hoyle introduces the essential points covered in Chapter 1 "What Is Financial
Accounting, and Why Is It Important?".

1.1 Making Good Financial Decisions about an Organization

LEARNING OBJECTIVES
At the end of this section, students should be able to meet the following
objectives:
1. Define “financial accounting.”
2. Understand the connection between financial accounting and the
communication of information about an organization.
3. Explain the importance of gaining an understanding of financial
accounting.
4. List decisions that an individual might make about an organization.
5. Differentiate between financial accounting and managerial accounting.
6. Provide reasons for individuals to study the financial accounting
information supplied by their employers.
Financial Accounting and Information
Question: In the June 30, 2011, edition of The Wall Street Journal, numerous headlines
described the recent activities of various business organizations. Here are just a few:
“TMX and LSE Give Up on Planned Merger”
“Ally Financial Faces Charge for Mortgage Losses”
“HomeAway Jumps 49% in Debut”
“Ad-Seller Acquiring Myspace for a Song”
Millions of individuals around the world read such stories each day with rapt interest. From
teen-agers to elderly billionaires, this type of information is analyzed obsessively. How are
these people able to understand all the data and details being provided? For most, the secret
is straightforward: a strong knowledge of financial accounting.
This textbook provides an introduction to financial accounting. A logical place to begin such
an exploration is to ask the obvious question: What is financial accounting?

Business Accounting author Joe Ben Hoyle, C. J. Skender