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Unformatted text preview: 1-10SOLUTIONS TO CONCEPTS FOR ANALYSISCA 1-1(a)Financial accounting is the process that culminates in the preparation of financial reports relative tothe enterprise as a whole for use by parties both internal and external to the enterprise. In contrast,managerial accounting is the process of identification, measurement, accumulation, analysis, prepa-ration, interpretation, and communication of financial information used by the management to plan,evaluate, and control within an organization and to assure appropriate use of, and accountability for,its resources.(b)The financial statements most frequently provided are the balance sheet, the income statement,the statement of cash flows, and the statement of changes in owners’or stockholders’equity.(c)Financial statements are the principal means through which financial information is communicated tothose outside an enterprise. As indicated in (b), there are four major financial statements. However,some financial information is better provided, or can be provided only, by means of financialreporting other than formal financial statements. Financial reporting (other than financial statementsand related notes) may take various forms. Examples include the company president’s letter orsupplementary schedules in the corporate annual reports, prospectuses, reports filed with govern-ment agencies, news releases, management’s forecasts, and descriptions of an enterprise’s socialor environmental impact.CA 1-2(a)In accordance with Statement of Financial Accounting Concepts No. 1, “Objectives of FinancialReporting by Business Enterprises,”the objectives of financial reporting are to provide information toinvestors, creditors, and others1.that is useful to present and potential investors and creditors and other users in makingrational investment, credit, and similar decisions. The information should be comprehensibleto those who have a reasonable understanding of business and economic activities and arewilling to study the information with reasonable diligence.2.to help present and potential investors and creditors and other users in assessing the amounts,timing, and uncertainty of prospective cash receipts from dividends or interest and the proceedsfrom the sale, redemption, or maturity of securities or loans. Since investors’and creditors’cashflows are related to enterprise cash flows, financial reporting should provide information to helpinvestors, creditors, and others assess the amounts, timing, and uncertainty of prospective netcash inflows to the related enterprise.3.about the economic resources of an enterprise, the claims to those resources (obligations of theenterprise to transfer resources to other entities and owners’equity), and the effects of trans-actions, events, and circumstances that change its resources and claims to those resources....
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- Spring '08
- ........., Financial Accounting Standards Board