Ch01 Prof Wolfe to post_1(2)

Ch01 Prof Wolfe to post_1(2) - Chapter 1 Financial...

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Chapter 1 Financial Statements and Business Decisions
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Accounting System Financial Accounting System (preparation of four basic financial statements). Managerial Accounting System (preparation of detailed plans, forecasts and reports). External Decision Makers (investors, creditors, suppliers, customers, etc.). Internal Decision Makers (managers throughout the organization). Understanding Business Operations Collects and processes financial information about an organization.
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Financial statements are the primary means of communicating financial information to parties outside the business organization. The Objectives of Financial Accounting
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GAAP/IFRS Financial Accounting translates events into financial statements Events Rules & Management choice Financial Statements G enerally A ccepted A ccounting P rincipals Management selects from alternative rules and from allowable estimates under GAAP/IFRS I nternational F inancial R eporting S tandards or
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How are standards determined? International Canada United States Monitor Monitoring Board -IOSCO -European Commission -JFSA -US SEC OSC SEC Formulates Accounting Rules IASB AcSB FASB Accounting Rules IFRS Canadian GAAP U.S. GAAP
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Financial Statements Financial Statements summarize the financial activities of the business Contain primarily historical information Four basic financial statements 1. Balance Sheet Assets = Liabilities + Owners Equity 2. Income Statement Revenue – Expenses = Net Income 3. Statement of Retained Earnings Cumulative sum of undistributed Net Income 4. Statement of Cash Flows
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