Ch1+Note+Posting - Chapter 1 The Purpose and Use of...

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Chapter 1 – The Purpose and Use of Financial Statements Users and Uses of Accounting Internal: External: People work for the company Senior management CEO CFO Controller (chief accountant) HR Marketing Employees Investors (potential) Shareholders (owners) Government Creditor (banks) Suppliers Customers Financial Accounting Managerial Accounting Taxation Accounting 1. Reporting business transactions 2. Prepare financial statement 3. Analyze financial statement 4. Auditing 5. Consulting 6. Forensic 1. Cost accounting 2. Budgeting (planning) 3. Internal audit 4. Management advisory services 1. Tax planning 2. Tax preparation 3. investigation 1
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Sole Proprietorship Partnership Corporation # of owner 1 2+ 1+ Business Entity Record-keeping Separated from the owner Separated from the owners Separated from the shareholders Legal Entity Not separated from the owner Not separated from the owners Separated from the shareholders Limited Liability No No Yes Limited to shareholders invest in the company Business Tax No business tax Pay personal tax (personal income) No business tax Each owner pays personal tax Business tax Shareholders pay personal taxes Equity (owner’s claim) Money in Capital, owner Money paid to owner Withdraws, owner Statement of changes in owners’ equity Money in Capital, separated by each owners (different accounts) Withdraws, different owners Statement of changes in owners’ equity Money in Share Capital Retained Statement of retained earnings Prior earnings=Retained earning, beginning Current year earning=net income/dividends Retained earning 2
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This note was uploaded on 06/18/2011 for the course MGT b05 taught by Professor Liang during the Spring '11 term at University of Toronto.

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Ch1+Note+Posting - Chapter 1 The Purpose and Use of...

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