Chapter 1 Class Notes

Chapter 1 Class Notes - Chapter 1 FINANCIAL ACCOUNTING...

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Chapter 1 Introduction Financial accounting is the process that culminates in the preparation of financial reports on the enterprise for use by both internal and external parties. Users of these financial reports include investors, creditors, managers, unions, governmental agencies, etc. The primary means by which a company communicates its financial information to interested parties is via financial statements . These statements provide a company’s history quantified in money terms. The financial statements most frequently provided are (1) the balance sheet, (2) the income statement, (3) the statement of cash flows, and (4) the statement of stockholders’ equity. Note disclosures are an integral part of each financial statement . While companies may also use their annual report to stockholders, the CEO’s letter to stockholders, news releases, etc. to communicate financial information to interested parties, our focus in this course will be on the financial statements and the related note disclosures. The Role of Financial Accounting in Our Economy The financial statements published by companies are a primary means by which capital allocation decisions are made in our economy. Interested parties – primarily investors and creditors – must have confidence in the financial statements provided to them and they must be able to rely on the information contained in the financial statements or they will be faced to make their decisions based on other factors. Can you name any? Objectives of Financial Reporting
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Chapter 1 Class Notes - Chapter 1 FINANCIAL ACCOUNTING...

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