Chapter 1 - FINANCIAL ACCOUNTING Third Edition Thomas R....

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©Cambridge Business Publishers, 2011 Prepared by Diane Tanner Thomas R. Dyckman ■ Robert P. Magee ■ Glenn M. Pfeiffer FINANCIAL ACCOUNTING Third Edition Chapter 1 Chapter 1 Introducing Financial Introducing Financial Accounting Accounting
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©Cambridge Business Publishers, 2011 2 What is Accounting? What is Accounting? Accounting is… The process of recording, summarizing, and analyzing financial transactions To help people make economic decisions Financial Accounting Managerial Accounting Designed primarily for decision makers outside of the company Designed primarily for decision makers within the company
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©Cambridge Business Publishers, 2011 3 Who Uses Accounting Information? Who Uses Accounting Information?
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©Cambridge Business Publishers, 2011 4 Information Needs of Decision Makers Information Needs of Decision Makers Investors and analysts Creditors Suppliers and customers Top management Marketing teams Production and operations Who are the Decision Makers? Buy or sell stock? Lend or not? Purchase/sell goods or not? Develop new strategy? Launch a new product or not? Manage operations What Decisions are Made? Sales and costs Cash in and cash out Assets and liabilities Product sales and costs Department performance Budgets and quality reports What Information is Needed?
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©Cambridge Business Publishers, 2011 5 Forms of Business Ownership Forms of Business Ownership A single owner who typically manages the daily operations A large number of owners not involved in managing day-to-day operations of the company Corporation Sole Proprietorship Two or more owners who are usually involved in managing the business Partnership A Legal Entity
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©Cambridge Business Publishers, 2011 6 Shareholders Shareholders Owners of shares of stock of a corporation Provide resources such as cash to a corporation in exchange for stock ownership Not involved in day-to-day business operations Rely on financial statement information To evaluate management performance Assess the company’s financial condition Predict future success
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©Cambridge Business Publishers, 2011 7 Growth of Corporations Growth of Corporations Begin as small, privately held businesses Private funding Expansion requires more capital for growth Publicly through organized stock exchanges Sell more stock Banks, investors Borrow
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©Cambridge Business Publishers, 2011 8 Creditors and Suppliers Creditors and Suppliers Creditors Banks and other lenders that provide money that must be repaid Use financial accounting information to assess loan terms, loan amounts, interest rates, collateral Suppliers Provide supplies, inventory, etc. needed for operations Use financial information to establish credit sales terms and to determine long-term commitment to supply-chain relations
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©Cambridge Business Publishers, 2011 9 Managers and Directors Managers and Directors Board of directors
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This note was uploaded on 08/16/2011 for the course ECON 300 taught by Professor Laren during the Spring '11 term at Missouri State University-Springfield.

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Chapter 1 - FINANCIAL ACCOUNTING Third Edition Thomas R....

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