ch01+Student - Chapter 1: Financial Accounting and...

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Chapter 1: Financial Accounting and Accounting Standards
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Securities and Exchange Commission American Institute of CPAs Financial Accounting Standards Board Changing role of the AICPA Financial Statements and Financial Reporting Parties Involved in Standard-Setting Generally Accepted Accounting Principles Issues in Financial Reporting Accounting and capital allocation Objectives Need to develop standards FASB Codification Political environment Expectations gap Financial reporting challenges International accounting standards Ethics Financial Accounting and Accounting Standards
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Financial Statements and Financial Reporting Essential characteristics of accounting are: (1) the identification , measurement , and communication of financial information about (2) economic entities to (3) interested parties. LO 1 Identify the major financial statements and other means of financial reporting.
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Financial Information Accounting? Identifies and Measures and Communicates Balance Sheet Income Statement Statement of Cash Flows Statement of Owners’ or Stockholders’ Equity Note Disclosures President’s letter Prospectuses Reports filed with governmental agencies News releases Forecasts Environmental impact statements Etc. GAAP Financial Statements Additional Information Economic Entity Financial Statements and Financial Reporting LO 1 Identify the major financial statements and other means of financial reporting.
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Resources are limited . Efficient use of resources often determines whether a business thrives. LO 2 Explain how accounting assists in the efficient use of scare resources. Illustration 1-1 Capital Allocation Process Accounting and Capital Allocation Financial Statements and Financial Reporting
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LO 3 Identify the objectives of financial reporting. Provide financial information about the reporting entity that is useful to u present and potential equity investors, u lenders, and u other creditors in making decisions in their capacity as capital providers. Objectives of Financial Reporting Financial Statements and Financial Reporting
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Equity Investors and Creditors Investors are the primary user group. Objective of Financial Accounting General-Purpose Financial Statements u Provide financial reporting information to a wide variety of users. u Provide the most useful information possible at the least cost. LO 3 Identify the objectives of financial reporting.
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Objective of Financial Accounting Investors are interested in assessing the company’s 1. ability to generate net cash inflows and 2. management’s ability to protect and enhance the capital providers’ investments. Entity Perspective Companies viewed as separate and distinct from their owners. LO 3
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ch01+Student - Chapter 1: Financial Accounting and...

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