(1) Overview of Corporate Financial Reporting

(1) Overview of Corporate Financial Reporting - Chapter 1...

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Chapter 1 – Overview of Corporate Financial Reporting What is a Business? A business usually sells products or services, and/or invests in other businesses o The goal of a business is to earn a profit for its owners What is Accounting? It is an information system where underlying economic conditions of organizations and individuals are recorded, summarized, reported, and understood o It provides vital financial information Financial Statements: Summarize how the company performed during a particular period (for the owner’s) o Final set of documents that are produced at the end of each accounting period Annual report is sent to the owner’s but many others who have interest in the company use it as well Companies have to produce quarterly and annual reports, but they can be paperless Forms of Organization: Profit-seeking entities (corporations, sole proprietorships, partnerships, etc…) Service entities (hospital and academic institutions) Not-for-profit entities (charities and clubs) Present financial statements to users so they can make informed decisions In a partnership , an owner’s initial investment is called the owners’/partners’ capital o In a corporation it is called shareholders’ equity (shares) Share: Document that represents a small part of ownership in a corporation o Owners = shareholders o Shares are easily transferred from one investor to the next Publically Traded Corporations: Trade on the public stock exchange (ownership changes hands on a daily basis) Private Held Corporations: Do not trade on the public stock exchange (transfer of ownership is more difficult)
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The fourth quarter report is combined with the reports from the previous three quarters to produce financial statements that cover the entire fiscal year Users of Financial Statements: Accountants summarize business transactions into a format that is understandable and thus useful to users Internal Users – (management and board of directors) o
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(1) Overview of Corporate Financial Reporting - Chapter 1...

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