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Chapter01 - Chapter One Introduction to Financial...

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Chapter One Introduction to Financial Statements Zining Li ACCT 2301 FALL 2009 Cox School of Business, SMU
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Acct 2301 Li Fall 09 Chapter 1 2 What do we hope to learn? What are the characteristics of a corporation? What are the four basic financial statements? What information does each statement convey? What categories of items are reported in each financial statement? How are elements within a statement related?
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Acct 2301 Li Fall 09 Chapter 1 3 How is Business Formed Sole proprietorship Single owner Not separate entity for liability & responsibility Partnership Two or more owners, but not a separate entity Corporation Typically multiple owners separate legal entity This course is about Corporations.
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Acct 2301 Li Fall 09 Chapter 1 4 Corporations Popular form of business because… It’s simple for individuals to purchase small amounts of stock Allows easy transfer of ownership through established exchanges Provides limited liability – the most you can lose is your initial investment Easier to raise capital
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Acct 2301 Li Fall 09 Chapter 1 5 Separate Legal Entity Since a corporation is a separate legal entity it can: Own assets Incur liabilities Sue and be sued Enter into contracts independent of the stockholders (owners)
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Acct 2301 Li Fall 09 Chapter 1 6 Accounting System and its Users Accounting system records and summarizes financial information.
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