ACC 301 Chapter 1.docx - Ch. 1 1.1 Financial Reporting...

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Ch. 11.1Financial Reporting EnvironmentFinancial Statements1.Balance Sheet2.Income Statement3.Statement of Cash Flows4.Statement of Stockholders’ EquityFinancial Reporting1.Supplementary schedules in the corporate annual report2.Prospectusesa.A printed document that advertises or describes a school, commercial enterprise, forthcoming book, etc., in order to attract or inform clients,members, buyers, or investors.3.Reports filed with government agencies4.Management’s forecastsNote Disclosureexplains other information regarding a company’s financial statements. Provide extra light as to what is going onProcess of Capital Allocation1.Financial Reportinga.The financial information a company provides to help users with capital allocation decisions about the company2.The Users (Present & Potential)a.Investors and Creditors use financial reports to make their capital allocation decisions3.Capital Allocationa.The process of determining how and at what cost money is allocated among competing interests.b.I.E. figuring out where to put your resources most effectivelyFinancial Reporting Objective:Provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in decisions about providing resources to the entityDebt Instrument Obligation that enables the issuing party to raise funds by promising to repay a lender in accordance to terms in a contractGeneral Purpose Financial StatementsProvide at the least cost the most useful information possible to a wide variety of usersUnderlying Concept of the above 3 bullet points:
While the objective of financial reporting is focused on investors and creditors, financial statements may still meet the needs of others.Entity PerspectiveCompanies are viewed as separate and distinct from their owners (stockholders) Assets in a company are viewed as the company’s assets and not assets of a specific creditor or shareholder

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