Financial Accounting 02

Financial Accounting 02 - ofA lnformolion Quolities...

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Quolities of Accounling lnformolion -rr--t I I I I I t Here's Where You've Been In Chopter 1, you leorned thot o business odds volue to moke o profit You leorned thot business tronsoctions con be clossified os operoting, investing, or finoncing. The four bosic finonciol stotements-the income stotement, the stotement of chonqes ln shoreholders' equily, the bolonce sheet, ond the stotement of cosh flows-provide informotion cbout these business processes | | / \ A il \/ t r-lere s vvnere You fe uotno When you ore finished with Chopter 2, you should understond the quollties of the informotion in the finonciol stotements. You should be oble to recognize ond exploin the difference beMeen occruol bosis occountinq ond cosh bosis occountinq. frenrniryt W{#*fivps When you are finished studying this chapter, you should be able to: 1. Define generally accepted accounting principles and explain why they are necessary. 2. Explain the objective offinancial reporting and the qualities necessary to achieve this objective. 3. Identify the elements of the financial statements and describe their characteristics. 4. Define accrual accounting, explain how it differs from cash basis accounting, and
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CHAPTER I o QUALITIES OF ACCOUNTING INFORMATION #{dtss;V{affers In April 2006, with just two weeks until the start of his trial, Com- puter Associates International's former CEO, Sanjay KumaL pleaded guilty to securities fraud and obstruction of justice. Not only did Kumar engage in a conspiracy to inflate the firm's 2000 and 2001 sales revenue, he also authorized a $3.2 million payment to buy the silence of potential witnesses. In November 2006, he * was sentenced to 12 years in prison and fined $8 million for his part in the $2.2 billion fraud. Why would a smart and wealthy man falsify accounting records, taking the risk of a long prison sentence? Sometimes people in power begin to feel invincible. lt is important for every individual to have a strong sense of ethical behavior and to apply high moral standards to every business decision, no matter how small. Too often a number of seemingly small decisions can add up to one big crime. Information for Decision
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Financial Accounting 02 - ofA lnformolion Quolities...

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