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Week 6-1 - Econ/Mgmt4Spring2010 Week6.1 AccountingChoices...

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Econ/Mgmt 4 Spring 2010 Week 6.1 Accounting Choices Background, Concepts, Processes Reader Chapter 6
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What have we learned?    To evaluate  the nature of business  transactions in order: to classify  and to communicate  the “results” of  those transactions. 
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Evaluate?    Front office –  direct profit-making  activities.  Revenue & Expense accounts. Back office    support activities.   Adjustments to Working Capital accounts.   Investing and financing activities.
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Classify?    Operating activities –   recognizing  revenue & matching expenses.  Adjusting  Working Capital accounts. Investing activities    acquiring &  disposing of (buying & selling) long-lived  assets. Financing activities    sourcing invested  capital and paying a return to invested  capital.
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Next?    Exploring some of the subtleties in  applying a principles-based approach –  accrual  - to communicating financial  performance, i.e.  What is the affect of  management  judgment? And, Learning the details and the consequences  of accounting choices.
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SFAS’s are combinations of rules and guidelines to  adapt rules to different industries. Management can make choices. This creates an accounting posture that can be either: 1.
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