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Intro. to Financial Accounting

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by

Lillian Lee

on 28 August 2013

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Transcript of Intro. to Financial Accounting

Welcome to Principles of Accounting
Introduction to Accounting
Accounting is the
"language of business"
is an information system that
measures
business activities,
processes
that information into reports, and
communicates
the results to decision makers.
Banks
Too Big
To Fail
Gretchen Morgenson - New York Times journalist
4 Financial Statements
The Income Statement
Revenues - Expenses = Net Income (Loss)
The Statement of Retained Earnings
changes in shareholders' equity
The Balance Sheet
Assets = Liabilities + Shareholders' Equity
The Statement of Cash Flows
3 main business activities: Operating, Investing, Financing
GAAP:
Generally Accepted Accounting Principles - guidelines for measurement and disclourse of financial information
FASB:
Financial Accounting Standard Board - responsible for setting GAAP
Financial vs Managerial
Financial Accounting
- for external users like shareholders or stockholders and creditors.

Managerial Accounting
- for internal users with in the organization, like managers.
WalMart Meets With
Shareholders
Walmart purchases a new $15 million buyback program. Certain activists showed up to ask Walmart to improve conditions for factories in overseas companies.
http://nyti.ms/11XpfkS

Summary of Accounts
4 Main Activities
1.Establishing goals & strategies
2. Obtaining financing
3. Making investments
4. Conducting operations
Users of Financial Accounting Information
Managers & employees
Investment analysts and information intermediaries
Creditors and suppliers
Shareholders and directors
Customers and strategies partners
Voters and representatives
Policymakers:
SEC & FASB
Perceived
Economic
Consequences
Economic
Consequences
Actual
Accounting
Practices
GAAP
Policy Making Process
Public Input
Congress,
White House,
government
agencies
Public hearings,
letters
Framework & Assumptions
FASB's conceptual framework states that acoutning should be:
Relevant & reliable
Comparable & consistent
Basic assumptions are the foundation of financial accounting measurements, they are:
Economic entity
Cost
Fiscal period
Going concern
Stable dollar
Accounting Equation
Assets
=
Liabilities
+
Shareholder's Equity
Investing
=
Non-owner Financing
+
Owner Financing
Sarbanes- Oxley Act
Oversight of Financial Accounting
Response to corporate scandals
Needs principal executive and financial officers to certify statements of financial
More responsibilities on managements to ensure internal control
Increase criminal penalties
Created PCAOB to oversee audit firms
Auditors Report
Financial statements of a company's financial condition
Auditor's responsibility is to express opinions on statements
Sampling of transaction, not investigation
Review accounting policies used by management and the estimates used in preparing the statements
Not an Exact Science
GAAP allows companies several choices for preparing their financial statements
Must choose the allowed choices
Depends on countless estimates
Let's have a wonderful semester of fun financial accounting!
Full transcript