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Chapter_1_Lecture_Notes_GQF-_Student

Chapter_1_Lecture_Notes_GQF-_Student - Chapter 1 The...

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Unformatted text preview: Chapter 1 The Purpose and Use of 9/2/2011 1 Financial Statements Learning Objectives 1. Identify the different users and their information needs 2. Describe the information conveyed to different decision makers in each of the 4 financial statements namely: – Statement of Financial Position tatement of Comprehensive Income After studying this chapter, you should be able to: – Statement of Comprehensive Income – Statement of Changes in Equity – Statement of Cash Flow 3. Define GAAP- IFRS or ASPE? 4. Explain the role of managers and auditors in the accounting communication process 5. Understand the importance of ethics, reputation and legal liability in accounting 9/2/2011 2 Users Perspective OBJECTIVES OF FINANCIAL ACCOUNTING c Identifies and records the economic events of an organization c Communicates financial information to those running the business and outsiders c Both quantitative and qualitative information about the operation or business entity c Financial statements- financial information about a company to outside parties about a business organization. 9/2/2011 3 Who are the users of Financial Statement Information? c Internal Users: – Management – Board of Directors anage, plan, organize and run a business – Manage, plan, organize and run a business c External Users: – Shareholders – Potential Investors – Creditors – Regulators/tax authorities 9/2/2011 4 What are some examples of users’ information needs? Business owners/ investors/ shareholders look for two things: Creditors • lend money to a company for a specific length of time: 1. Increase value of organization– for future sale– long term goal 2. Converting Earnings to Dividends- short term goal 9/2/2011 5 length of time: 1. Earn interest 2. Received debt repayment There are 3 different forms of business organizations (Appendix 1a) c Sole Proprietorships – Owner personally responsible for business debt. Not a legal entity separate from owners artnerships c Partnerships – Partners personally responsible for all partnership debts c Corporation – Separate legal entity, corporation responsible for its own debt – May be public or private 9/2/2011 6 Understanding Business Operations Accounting System c Collects and process information c Reports information to decision makers 9/2/2011 7 Financial Accounting System (preparation of four basic financial statements) Managerial Accounting System (preparation of detailed plans, forecasts, standard costing and reports) Communicates to External Decision Makers Communicates to Internal Decision Makers Responsibilities for the Accounting Communication Process Preparer of the information must effectively communicate to the reader/users on a timely basis • Financial Statement is the accounting report for 9/2/2011 8 Decision makers Decision makers (readers/users) (readers/users) need to understand need to understand accounting measurement rules. accounting measurement rules....
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Chapter_1_Lecture_Notes_GQF-_Student - Chapter 1 The...

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