ch01-AFM101w2012

ch01-AFM101w2012 - 1-1 FINANCIAL ACCOUNTING Fourth Canadian...

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Financial Accounting 1-1 PowerPoint Author: Robert G. Ducharme, MAcc, CA University of Waterloo, School of Accounting and Finance FINANCIAL ACCOUNTING Fourth Canadian Edition LIBBY, LIBBY, SHORT, KANAAN, GOWING Financial Statements and Business Decisions Chapter 1
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1-2 Financial Accounting Understanding the Business The Players The Players Investors Investors Creditors Creditors Managers The The Business Business Operations Operations 1. Purchase materials and labour 2. Manufacture product 3. Sell products to customers 4. Collect cash from customers and pay creditors LO 1
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1-3 Financial Accounting Business owners (called investors or shareholders ) look for two sources of possible gain: Sell ownership interest in the future for more than they paid. Receive a portion of the company’s earnings in cash (dividends). Understanding the Business LO 1
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1-4 Financial Accounting Creditors lend money to a company for a specific length of time and gain by charging interest on the money loaned. Mel’s Diner Loan Interest Business Background LO 1
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1-5 Financial Accounting Manufacturers either make the parts needed to produce its products or buy the parts from suppliers . Manufacturer Product Customer Understanding Business Operations LO 1
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1-6 Financial Accounting The Accounting System Collects and processes financial information Reports information to decision makers Managers (internal decision makers) Investors and Creditors (external decision makers) LO 1
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1-7 Financial Accounting External Decision Makers Investors, creditors, suppliers, customers, etc. Internal Decision Makers Managers throughout the organization The Accounting System Accounting System Financial Accounting Reports Periodic financial statements and related disclosures Managerial Accounting Reports Detailed plans and continuous performance reports LO 1
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1-8 Financial Accounting The Accounting System and Decision Makers Cash Equipment Inventory Notes  Payable An organized format used by companies to accumulate the dollar effects of transactions. LO 1
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1-9 Financial Accounting Information Conveyed in Financial Statements When studying the financial statements you should focus on these questions: 1. What categories of items (often called elements ) are reported on each of the four statements? (What type of information does a statement convey, and where can you find it?) 2. What time period (monthly, quarterly, annual) is covered by the financial statements? 3. How are the elements within a statement related? These relationships are usually described by an equation that tells you how the elements fit together. 4. Why is each element important to managers’, owners’ or creditors’ decisions? (How important is the information to decision makers?) LO 1
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1-10 Financial Accounting The Four Basic Financial Statements 1.
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This note was uploaded on 04/02/2012 for the course AFM 101 taught by Professor Kennedy during the Winter '08 term at Waterloo.

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ch01-AFM101w2012 - 1-1 FINANCIAL ACCOUNTING Fourth Canadian...

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