1_Intro to Accounting - Todays Agenda Welcome! Course...

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Today’s Agenda Welcome! Course Overview An Analogy for the course Business Basics What is accounting? A firm and the markets (Role for Accounting) Financial Accounting Process The 4 Financial Statements: Introduction Key Concepts An Example: Apple Other Parts of an Annual Report Syllabus Mgmt 600 Class 1 Notes: Johnston Copyright 2011 Page 1
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Course Overview Financial Statement User perspective External vs. Internal Financial Statements External Users Internal Users Begin to learn how to read Financial Statements What you can learn What you cannot learn Accounting is fairly complex and detailed – we will focus on some key topics/principles * Still challenging!!!
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Big Picture Analogy Baseball – has anyone not heard of baseball? Let’s assume we are all major league managers and we are looking for a new starting pitcher. How would we choose which pitchers to pursue? What factors would we consider? Ultimately what are we trying to evaluate or project? How might we contract with this individual - ideally? Mgmt 600 Class 1 Notes: Johnston Copyright 2011 Page 3
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Business Activities (Basics) All businesses require capital or Financing - Why? * 2 options * Debt (i.e. Bonds or notes) or non-owner financing * Equity (common stock or shares) or owner financing What they do with those funds – Invest * 2 choices * Operating assets (land, building, Equipment, Vehicles, Inventory) * Financial assets (Cash, Investments) Notice: Financing = Investing The Primary Financial Statement – The Balance Sheet reflects this relation with Assets (Operating and Financial) equaling Liabilities and Equity Operating Activity represents whatever is required to create the good or service that your business provides. A business creates value for its owners by generating profits and or excess cash. The second financial Statement – The Income Statement or Statement of Operations reflects operating activity and profitability (losses if negative). Sales or Revenues less expenses equal net income (profit). The third financial statement – The Cash Flow statement – reflects cash inflows and outflows related to Financing, Investing and Operating activities. The income statement reflects accrual accounting and hence is complimented by the information in the cash flow statement.
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The financing and investing sections of the cash flow statement reflect some of the changes that occur to the balances that appear on the balance sheet. What is accounting ? Generally, an accounting system is an information / reporting system whose purpose is to gather, record and report economic information about transactions and events which effect an economic unit – an accounting entity – to users in order to enable them to make rational decisions and evaluate stewardship . What is stewardship?
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This note was uploaded on 10/17/2011 for the course MGMT 600 taught by Professor Johnston during the Spring '11 term at Purdue University-West Lafayette.

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1_Intro to Accounting - Todays Agenda Welcome! Course...

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