ch01 - CHAPTER1 Accounting in Action 1-1 PreviewofCHAPTER1...

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1-1 CHAPTER 1 Accounting in Action
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1-2 Preview of CHAPTER 1
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1-3 Purpose of accounting is to: identify , record , and communicate the economic events of an organization to interested users. What is Accounting?
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1-4 Three Activities Illustration 1-1 Accounting process The accounting process includes the bookkeeping function. What is Accounting?
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1-5 Management There are two broad groups of users of financial information: internal users and external users . Human Resources IRS Labor Unions SEC Marketing Finance Investors Creditors Customers Internal Users External Users Who Uses Accounting Data
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1-6 Common Questions Asked User 1. Can we afford to give our employees a pay raise? Human Resources 2. Did the company earn a satisfactory income? 3. Do we need to borrow in the near future? 4. Is cash sufficient to pay dividends to the stockholders? 5. What price for our product will maximize net income? 6. Will the company be able to pay its short-term debts? Investors Management Finance Marketing Creditors Who Uses Accounting Data
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1-7 Various users need financial information Various users need financial information The accounting profession has attempted to develop a set of standards that are generally accepted and universally practiced. Financial Statements Balance Sheet Income Statement Statement of Owner’s Equity Statement of Cash Flows Note Disclosure Financial Statements Balance Sheet Income Statement Statement of Owner’s Equity Statement of Cash Flows Note Disclosure Generally Accepted Generally Accepted Accounting Accounting Principles (GAAP) Principles (GAAP) Generally Accepted Accounting Principles (GAAP) Principles (GAAP) Generally Accepted Accounting Principles
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1-8 Generally Accepted Accounting Principles (GAAP) - A set of rules and practices, having substantial authoritative support, that the accounting profession recognizes as a general guide for financial reporting purposes.
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