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Unformatted text preview: CH 1 The Financial Statements Accounting is the language of business. Accounting is a system that collects and processes (analyzes, measures, and records) financial information about an organization and reports that information to decision makers. WHAT IS FINANCIAL ACCOUNTING? Financial accounting is a process of identifying, recording, and communicating the economic events of interest to external users. 1) Identifying events: sale, purchase, borrowing, etc. 2) Recording: journal entries, T-accounts, trial balance, etc. 3) Communicating: income statement, balance sheet, statement of retained earnings, statement of cash flows Financial Accounting System Preparation of four basic financial statements and related disclosures Managerial Accounting System Preparation of detailed plans, forecasts, and performance reports Internal Decision Makers Managers throughout the organization External Decision Makers...
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