Exam Review 1 - EXAM 1 REVIEW SHEET 9.23.10 1 Objective of...

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EXAM 1: REVIEW SHEET 9.23.10 1. Objective of Financial Accounting: Provides information primarily for external decision makers 2. Purpose and content of financial statements: BS: to report the financial position of an accounting entity at a point in time (specific date); assets, liabilities, and stockholder’s equity A=L+SE IS: to report the revenues less the expenses for the accounting period; net income, revenues, expenses NI=R-E SRE: to report how net income and the distribution of dividends affected the financial position of the company for this accounting period; ending retained earnings=beginning retained earnings+net income-dividends SCF: to report inflows and outflows of cash during the accounting period; three categories-operating activities, investing activites, and financing activities; change in cash=CFO+CFI+CFF; change in cash+beginning cash balance=ending cash balance 3. Financial Statement Equations: BS: A=L+SE-CC \RE IS: NI=R-E SRE: End RE=Beg RE+NI-Dividends SCF: change in cash=CFO+CFI+CFF change in cash+beginning cash balance=ending cash balance 4. FASB/SEC/GAAP: FASB: Financial accounting standards..; the actual rule setting body SEC: Securities and Exchange Commission; has power to determine rules GAAP: Generally accepted accounting principles
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