ACC 203 Lecture Notes - Lecture 7: Accounting, Financial Statement

• School: Pace University
• Department: Accounting
• Course: ACC 203
• Professor: Donabedian

Document Summary

Financial accounting: economic consequences & managerial preferences for accounting. The selection of accounting principles occurs at two levels: the fasb determines which principles constitute gaap. In a number of instances, however, the fasb allows use of more than one method. However, businesses incur costs to generate info required by the fasb. Thus, fasb attempts to balance the costs & benefits of its rulings. Some members of financial community suggest that corporate managers act in the same way: ex: in choosing an inventory method, managers balance costs of implementing each method w/ quality of info that each method yields. A more sophisticated view recognizes that accounting principles have economic consequences to managers & their firms, & that these consequences are considered by managers when choosing accounting principles. Expansion may enhancing a manager"s employment opportunities: increased net income is usually in shareholders" best interest.