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FINACCNTEXAM1STUDYGUIDE - What is the PURPOSE of Accounting...

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What is the PURPOSE of Accounting? 1. Identify- select transactions 2. Record – record, classify, summarize 3. Communicate – prepare accounting reports Who Uses Accounting Data? 1. Internal Users: - Human Resources - Management - Finance - Marketing 2. External Users: - Investors & Creditors ** 2 biggest - Labor Unions - SEC - IRS - Customers Who Uses Accounting Data? 1. Can we afford to give our employees a raise? – HUMAN RESOURCES 2. Did the company earn a satisfactory income? - INVESTORS 3. Do we need to borrow in the near future? - MANAGEMENT 4. Is cash sufficient to pay dividends to stockholders? - FINANCE 5. What price for our product will maximize net income? - MARKETING 6. Will the company be able to pay its short-term debts? - CREDITORS The Building Blocks of Accounting 1. Ethics: standards of conduct by which ones actions are judged as right or wrong, honest or dishonest, fair or not fair 2. GAAP: Generally Accepted Accounting Principles 3. Financial statements: - Balance sheet - Income Statement - Statement of Owners Equity -
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