Lesson 1 Notes

Lesson 1 Notes - Lesson 1 Pro b l e m 1 1

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1 2 3 4 5 6 Problem 1-1 - Answer Answer: Language exists to provided a means of communication. Accounting is referred to as the "language of business" because its sole purpose is to communicate business information. A. Why is accounting sometimes referred to as the "language of business?" Problem 1-1 - Answer Answer: Balance Sheet (sometimes referred to as a Statement of Financial Position) Income Statement (sometimes referred to as a Statement of Earnings, Statement) Statement of Cash Flows Although not required, most companies also provide a Statement of Retained Earnings or a more complete Statement of Owners' Equity, which provides information as to the causes of changes in retained earnings and other elements of owners' equity over a period of time. B. Financial accounting information is provided through general- purpose financial statements. i. What are the three general purpose financial statements required under generally accepted accounting principles? Problem 1-1 - Answer Answer: The notes to a company's financial statements provide supplemental information that; (1) explains certain key accounting policies used in the preparation of the financial statements, (2) provides additional detailed information in support of financial statement amounts and (3) discloses other important information not reflected in the financial statements. Most notes to the financial statements are provided in compliance with requirements under generally accepted accounting principles. B. Financial accounting information is provided through general purpose financial statements. ii. What are the "notes to the financial statements?" Problem 1-1 - Answer Answer: The primary users of financial statement information are current or potential investors and creditors, analysts providing investment advice and government regulatory bodies such as the Securities and Exchange Commission ("SEC") and Federal Trade Commission ("FTC"). In addition, employee unions, suppliers, prospective employees and the media are among other frequent users of financial statement information. Although management personnel require much more detailed information in administering a company's day-to-day operations, the summarized results provided through a company's financial statements can be helpful to managers in evaluating progress in reaching a company's overall goals. Managers are especially interested in financial statement results if bonuses and raises are predicated on overall performance measures. B. Financial accounting information is provided through general purpose financial statements. iii. Who uses financial statement information and why? Problem 1-1
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This note was uploaded on 10/27/2011 for the course ECON 110 taught by Professor Vernon during the Winter '07 term at BYU.

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Lesson 1 Notes - Lesson 1 Pro b l e m 1 1

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