acct 211 - Ch1 notes

acct 211 - Ch1 notes - Ch. 1 Notes (Page 1) ACCOUNTING...

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Ch. 1 Notes (Page 1) ACCOUNTING INFORMATION : accounting “links” decision makers with economic activities - and with the results of their decisions Decision makers: - people who have money to invest - creditors (banks loaning the money) - stockholders/investors - Governmental agencies (IRS,SEC,etc.) - Employees (interested in job stability, etc) - Customers - Competitors GOAL OF ACCOUNTING : economic activities --- accounting process --- accounting information ---- decision makers - economic activities = transactions “exchanges over time” - accounting process = process of recording transactions into system and classify- ing - accounting information = 1.financial statements 2.notes 3.management letter - decision makers = invest? buy from? loan money? work for? etc. .. re-asses the accounting information over time hopefully make better decisions than would otherwise ACCOUNTING AS AN INFORMATION SYSTEM : (info the decision makers need to have) revenues (sales) and expenses = profit or loss assets (has value) and liabilities (risk, debt) = financial position “how stable” cash flows (liquidity) = ability to pay (bills, payroll, etc) - incoming cash = positive - outgoing cash = negative cash flow
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Ch. 1 Notes (Page 2) EXTERNAL USERS WOULD BE INTERESTED IN CASH FLOW PROSPECTS : (ability to pay) Investors Creditors Return on invest-
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acct 211 - Ch1 notes - Ch. 1 Notes (Page 1) ACCOUNTING...

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