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MGCR 211 (108)

Financial Accounting Chapter 1

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McGill University
Management Core
MGCR 211
Erica Pimentel

Chapter 1: Overview of Corporate Financial Reporting Accounting- an information system in which the underling economics conditions of the organizations/ individuals are recorded, summarized, reported, and understood Financial statements- managements’ report to the companies’ owners that summarize how the company performed during a particular period. -final set of documents produced at the end of an accounting period -included in a larger annual report= main method management uses to report results of co’s activities at end of the year -present financial information to users- telling them whether they are financially sounds, meeting their goals, likely to remain viable, etc Forms of Organization -profit seeking entities (corporations) -governing organizations (federal, provincial, municipal governments) -service entities (hospitals/ academic institutions) -non-for-profit entities (charities and clubs) -owners make initial investment in either cash or property -in sole proprietorships/ partnerships= owners’/ partners’ capital Shareholders’ equity- corporation owners’ investments in company -represented by documents: shares -shares/stocks easily transferred/ sold without affecting company Publicly Traded Corporations: - large corps where these stocks are traded in public stock exchange Privately Held Corporations: -shares held by small #individuals= not traded in public stockshareholders more involved in company Shareholders  (elect) Board f Directors (hire) Senior Exec.s Managers (Managers) -Managers makes these financial statements/ annual reports Users of Financial Statements Internal Users -Managemnet and the Board of Directors -used for pricing products, expanding operations, buy/ lease equipment, controlling costs -access to more info than that on the financial statements (managerial/ cost accounting) External Users -Shareholders/ Potential Investors -helps decide to buy/ sell more bonds comparing share price with company’s underlying value; change
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