Chapter 1 - 2 External reporting(financial accounting ex...

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Chapter 1 5/23/11 p. 4 Purpose of accounting (accounting system) is 1. Analyze transaction – what is it? 2. Bookkeeping task (double entry system) – record it! 3. Structure the information – general reports Balance sheet – assets and liabilities Income statement – revenues and expenses Cash flow statement Every transaction must have a minimum of two entries (debit and credit) p.5 Analysis - > bookkeeping - > evaluation Key components of accounting 1. Quantitative 2. Financial 3. Useful 4. Decisions p.6 Business – goal: general revenue, make money Non-profit organization – goal: provide services Business pays income taxes and non-profit organization does not pay income taxes Two roles of accounts 1. Accounting cycle – analyzing, recording, classifying, summarizing, and reporting the trasactions of a business 1. Advising p.8
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The accounting cycle 1. Internal reporting (Management Accounting) ex. Budgets, cost analyses, divisional performance reports.
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Unformatted text preview: 2. External reporting (financial accounting) ex. SEC, regulate stock exchange, IRS, taxes. They all follow individual rules/laws p.9 Balance sheet involves assets, liabilities, and owners’ equity Accounting equation – Assets = liabilities + owners’ equity Income statement (revenue – expenses) – reports the amount of net income earned by a company during a period p. 12-13 FASB (Financial Accounting Standards Board) – non-government agency, nonprofit that deal with profit making sector General Accepting Accounting Principal (GAAP) – balance sheet, income statement, and cash flow. In order to run the business you need to look at: 1. The numbers of computer sold during a period 2. Selling price + cost of items sold s 3. Number of items purchased for sale during a period and the quantity of units remaining at the end of the period 4. Employee wages + benefits 5. Unions costs...
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Chapter 1 - 2 External reporting(financial accounting ex...

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