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Unformatted text preview: > > > > > > > > Understanding Accounting and Financial Statements Chapter 16 Explain the functions and importance of accounting, and identify the three basic activities involving accounting. Describe the roles played by public, management, government and not-for- profit accountants. Identify the foundations of the accounting system, including GAAP and the role of the Financial Accounting Standards Board (FASB). Outline the steps in the accounting cycle, and define double-entry bookkeeping and the accounting equation. Explain the functions and major components of the four principal financial statements: the balance sheet, the income statement, the statement of owners equity, and the statement of cash flows. Discuss how financial ratios are used to analyze a companys financial strengths and weaknesses. Describe the role of budgets in a business. Outline accounting issues facing global business and the move toward one set of worldwide accounting rules. L e a r n i n g G o a l s 1 2 3 4 5 6 7 8 A c c o u n t i n g Accounting is the process of measuring, interpreting, and communicating financial information to support internal and external business decision making. Open book management- sharing sensitive financial information with employees and teaching them how to understand and use financial statements. Viewing financial information may help them better understand how their work contributes to the companys success. Outsiders use financial data to evaluate investment opportunities. O p e n B o o k M a n a g e m e n t B u s in e s s A c t i v i t i e s In v o lv i n g A c c o u n t i n g Financing activities provide necessary funds to start a business and expand it after it begins operating Investing activities provide valuable assets required to run a business Operating activities focus on selling goods and services, but they also consider expenses as important elements of sound financial management A c c...
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