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Chapter 1 Study Notes - Users & Uses

Chapter 1 Study Notes - Users & Uses - • Cash Flow...

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CHAPTER 1 STUDYNOTES 1 CH 1—ACOUNTING INFORMATION: USERS & USES POOL OF DATA FROM BUSINESS & FINANCIAL TRANSACTIONS FOR PERIOD OF TIME ACCOUNTANT ANALYZES & RECORDS FINANCIAL DATA OF VARIOUS EVENTS SUMMARIZES INTO DIFFERENT KINDS OF REPORTS TO PROVIDE MEANINGFUL INFORMATION TO DECISION-MAKERS SAME DATA CAN BE SUMMARIZED & REPORTED IN DIFFERENT WAYS DEPENDING ON TYPES OF DECISIONS TO BE MADE & TYPES OF USERS (DECISION-MAKERS) FINANCIAL ACCOUNTING MANAGERIAL ACCOUNTING Users Outsiders Current shareholders Potential investors (shareholders) Market analysts Creditors—banks, suppliers Government agencies—for example Securities & Exchange Commission Internal Revenue Service State Taxation Authorities Internal Management at various levels to make decisions such as: Expansion Discontinuing product line or division Budgeting Pricing Bonuses Reports Issued: Financial Statements Balance Sheet Income Statement Statement of Retained Earnings
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Unformatted text preview: • Cash Flow Statement • Accompanying Footnotes • Government Reports • Tax Return • 10-K Whatever kind of report that provides info relevant to decision at hand CHAPTER 1 STUDYNOTES 2 Governed by: Financial Statements--Generally Accepted Accounting Principles (GAAP) • Pronouncements issued by Financial Accounting Standards Board (FASB) • GAAP—“Bible” of accounting— established by FASB • Accounting principles governed by certain basic concepts & principles— reliability (objectivity), historical cost, going-concern, stable monetary unit— see textbook Government Reports—Congress, State legislatures, government agencies (eg— IRS, SEC) Professional managerial literature & studies (no governing body or “law”) Note—same basic pool of data, the accounting records, is used by both financial & managerial accounting; it is the compilation, summarization and kinds of reports issued that is different...
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