ACCT 327 test 1 Notes

ACCT 327 test 1 Notes - Chapter 1 notes Financial Statement...

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Unformatted text preview: Chapter 1 notes Financial Statement and Financial reporting o Essential characteristics Identification, measurement, and communication of information about economic entities to interested parties. Financial accounting is the process the culminates in the preparation of financial reports for external (creditors, investors, government agencies) and internal (managers, or board of directors) users. Managerial accounting is the process of identifying, measuring, analyzing, and communicating financial information. o Financial Statements 1. Balance sheet 2. Income Statement 3. Statement of cash flows 4. Statement of owners or stockholders equity. o 10K (annual) & 10Q (quarterly) reports Letter to stockholder by CEO Management and discussion analysis Financial Statements Notes to financial Statements Other supplemental information(optional) Challenges facing financial accounting o Non financial measurement: fail to provide key performance measures widely used by management o Forward looking information: fail to provide future information to present investors o Soft assets: fail to provide information on soft assets (intangibles, employees) o Timeliness: Only quarterly or annual, no real time. Objectives of Financial Reporting o 1. Useful to present investors and creditors in making rational investment, credit and similar decisions. Comprehensive to those who have made a reasonable understanding. o 2. Assess the amounts, timing and uncertainty of prospective cash receipts from dividends or interest and the proceeds o 3. Clearly portrays the economic resources of an enterprise, the claims to those resources and the effects. Public accounting: accounting firms Industry firm: accountants within company. Need to develop standards o Generally accepted accounting principles (GAAP): common set of standards and procedures. Uniformity developed late 1930s (stock market crash) Parties involved in standard setting Securities and exchange commissions (SEC): Broad Powers to prescribe accounting practices and standards to be employed. o Administers the Security Exchange act of 1934 o SEC encourages private standard setting (expertise, resources, controlling) o SEC relies on FASB to develop accounting standards. o Required to file audited financial statements. o Can issue a stop order which prevent registrant from issuing or trading securities o Issues an efficiency letter American Institute of Certified Public Accountants (AICPA) national organization of CPAs. o AICPA appointed the Committee on Accounting procedure (CAP) which is composed of CPAs and issued 51 accounting research bulletins (ARB) during 1939 to 1959 Bulletins Dealt with accounting problems but failed to provide a structure....
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This note was uploaded on 05/03/2008 for the course ACCT 327 taught by Professor Knight during the Spring '08 term at Texas A&M.

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ACCT 327 test 1 Notes - Chapter 1 notes Financial Statement...

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