Contabilidad Intermedia I.docx - CHAPTER 1 Environment and...

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CHAPTER 1 Environment and Theoretical Structure of Financial Accounting The primary function of financial accounting is to provide useful financial information to users who are external to the business enterprise, particularly investors and creditors. PART A FINANCIAL ACCOUNTING ENVIRONMENT The financial statements most frequently provided are (1) the balance sheet, also called the statement of financial position, (2) the income statement, also called the statement of operations, (3) the statement of cash flows, and (4) the statement of shareholders’ equity. Also, companies must either provide a statement of other comprehensive income immediately following the income statement, or present a combined statement of comprehensive income that includes the information normally contained in both the income statement and the statement of other comprehensive income. We use the term financial reporting to refer to the process of providing this information to external users. Keep in mind, though, that external users receive important financial information in a variety of other formats as well, including news releases and management forecasts, prospectuses, and reports filed with regulatory agencies. THE ECONOMIC ENVIRONMENT AND FINANCIAL REPORTING In the United States, we have a highly developed free-enterprise economy with the majority of productive resources privately owned rather than government owned. For the economy to operate
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