230A_ch1_2 - Chapters 1 & 2 (a) External vs. Internal...

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(a) External vs. Internal reporting (b) Objective of financial accounting is to communicate information about financial condition and performance to EXTERNAL USERS (c) Who would use information 1. Stockholders 2. Creditors 3. Customers 4. Government Elements of the Financial Statements Element Definition Balance Sheet: Picture of financial condition ASSETS (A) = LIABILITIES (L) + STOCKHOLDERS EQUITY (SE) Assets Resources that have probable future benefits Liabilities Probable future sacrifices of economic benefits. Source of financing Equity Residual interest in the assets of an entity after deducting liabilities. Source of financing Income Statement: performance during period Revenue – Expenses = Net Income (Net Earnings) Revenue Inflow of assets or settlement of liabilities from sale of goods or services Expenses Outflow of assets or incurrence of liabilities Statement of Cashflows What activities generated cash and what activities used cash. Cash inflows and outflows divided into 3 sections: operating, investing and financing
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What goes in the financial statements (see article “10-K a Good Read for the Curious Investor”) Securities Acts of 1933 and 1934 created the SEC (Securities and Exchange
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230A_ch1_2 - Chapters 1 & 2 (a) External vs. Internal...

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