Prelim2 - A r eas of Account ing Financial Account ing Tax...

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Areas of Accounting Financial Accounting - EXTERNAL - Annual Report - Private/Public Accountant - C.P.A. - provides a means to analyze business Auditing Tax Accounting assists with tax collection Managerial Accounting - INTERNAL - Inside organization - C.M.A. - Financial reports pinpoint problems and opportunities
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Comparing Financial and Managerial Accounting Financial accounting is Primarily intended to provide information to external stakeholders such as stockholders, creditors, and government regulators; Prepares a standard set of financial statements ; Presents financial statements on a predetermined (usually quarterly or annual) schedule ; Governed by a set of generally accepted accounting principles . Managerial accounting is information to internal stakeholders such as managers of specific divisions or departments; Prepares customized reports designed to deal with specific problems or issues; Creates reports upon request by management rather than according to a predetermined schedule; Uses procedures developed internally and is not required to follow GAAP Tools of Managerial Product Costing Activity based costing; Incremental analysis An evaluation and comparison of the financial impact different alternatives would have in a particular decision
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Accounting Equation Total Assets = Total Liabilities + Shareholder’s/Owner’s Equity Owned = Owed + Owner’s Claims If asset value decreases => owner’s equity decreases since liabilities do not decrease Assets Current assets Cash Accounts Receivable Notes Receivable Inventory Fixed assets (long-term) Land Buildings Capital equipment Accumulated Depreciation Liabilities Current liabilities Accounts Payable Notes Payable Accrued Taxes Accrued Salaries Long-term liabilities Notes payable Bonds payable Owner’s Equity Stock shares/ common stock Components of a Typical Balance Sheet
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The “Typical” Income Statement Net Sales (Revenue) - Cost of Goods Sold Gross Profit - Operating Expenses (General expenses & depreciation) Net Profit Before Interest and Taxes (Operating Income) - Interest - Taxes Net Profit After Taxes (Net Income) Pro-forma” accounting A statement of the company's financial activities while excluding unusual and nonrecurring expenses when stating how much money the company actually made. company restructuring costs, decline in the value of the company's investments, adjusting the current balance sheet to fix faulty accounting practices in previous years.
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Solvency/Liquidity Ratios Short-Term Long-Term __Current  Assets__ Current  Liabilities -  Quick (Acid Test) Ratio -  Quick (Acid Test) Ratio Cash + Marketable Securities + Receivables Cash + Marketable Securities + Receivables Current  Current  Liabilities Liabilities - Current Ratio - Current Ratio - Debt to Equity - Debt to Equity Total  Total  Liabilities Liabilities     Owner’s Equity Owner’s Equity =
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This note was uploaded on 11/12/2009 for the course AEM 1200 at Cornell University (Engineering School).

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Prelim2 - A r eas of Account ing Financial Account ing Tax...

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