#2 Accounting

#2 Accounting - SM299-Management as a System Financial...

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SM299-Management as a System Financial Accounting I Balance Sheet, Income Statement, Statement of Cash Flows Statement of Retained Earnings Professor Theodore Chadwick building on earlier presentations by Professors Peter Arnold and Eng Wu
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There are 210 companies represented here in the auditorium. Who has the best company? Is this just a silly, academic question? Who cares? Lots of people Suppliers Managers/employees Customers Investors Government…
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What is Accounting? Two Basic Forms Managerial : Accounting info for internal decision making on: Marketing - product, place, price and promotion Operations - outsourcing, capital investment, inventory Control and performance measurement No formalized accounting reports Financial : Accounting info for external users on: Financial status of companies Performance and profitability Financial soundness or otherwise To afford comparability, formal accounting rules Very formal accounting reports Enron Tyco WorldCom Cendant
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Learning Financial Accounting Formal structure – like learning a new language Guidelines for learning success : 1. Persevere – lots of practice - do not give up!! 2. Reason rather than memorize – there is logic embedded here. Some Misconceptions/Barriers 1. Accounting is merely a number crunching exercise. 2. Computers are making accountants obsolete. 3. I am a [ non-accounting ] major; who needs accounting? Some Important Fundamentals 1. Companies like to make money – showing profits good 2. Companies do not like to pay taxes – showing profits bad
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What is Financial Accounting? Bookkeeping? is only recording data (in the right Precise & objective measurement? almost all accounting numbers are influenced by estimates Report market value of companies? use historical concept, record costs (assets, equity); liabilities (mixed). Book Value. Primary objective? provide economic information to external users .
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Characteristics Relevance Reliability accurate, unbiased, verifiable Comparability across companies Consistency across time Accounting Rules (GAAP) - SEC, FASB, AICPA
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Financial Statements Balance Sheet Snapshot of Business Income Statement Profit/Loss over a period Statement of Retained Earnings Undistributed income Statement of Cash Flows Where $ comes from / goes to
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The Balance Sheet What are Assets? What are Liabilities? What is Owner’s Equity? Why is it called a Balance Sheet? Think of assets as uses of funds acquire inventory, build factories, provide credit to customers, pay for expenses in advance. Think of Liabilities and Owners’ Equity as
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#2 Accounting - SM299-Management as a System Financial...

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