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Intro. to Financial Accounting
Transcript of Intro. to Financial Accounting
Introduction to Accounting
Accounting is the
"language of business"
is an information system that
that information into reports, and
the results to decision makers.
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
Generally Accepted Accounting Principles - guidelines for measurement and disclourse of financial information
Financial Accounting Standard Board - responsible for setting GAAP
Financial vs Managerial
- for external users like shareholders or stockholders and creditors.
- for internal users with in the organization, like managers.
WalMart Meets With
Walmart purchases a new $15 million buyback program. Certain activists showed up to ask Walmart to improve conditions for factories in overseas companies.
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
SEC & FASB
Policy Making Process
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:
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
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!