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BUS 251 (83)


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Business Administration
BUS 251
Anne Mac Donald

FINANCIALACCOUNTING a userSixth Canadian Edition CHAPTER ONE Overview of Corporate Financial Accounting John Wiley & Prepared by L. de Grace C.A. Overview of Corporate Financial Reporting  Accounting: an information system in which the underlying economic conditions of organizations and individuals are recorded, summarized, reported, and understood John Wiley & Sons Canada, Ltd. ©2011 Corporate Financial Reporting  Financial statements: reports summarizing a company’s performance during a particular period.  Annual report: reports the results of the company’s activities during the year John Wiley & Sons Canada, Ltd. ©2011 Forms of Organization  Profit-seeking entities  Governing organizations  Service entities  Not-for-profit entities John Wiley & Sons Canada, Ltd. ©2011 Forms of Organization  Sole proprietorships  Partnerships  Limited partnerships  Joint ventures  Crown corporations  Corporations John Wiley & Sons Canada, Ltd. ©2011 Corporate Financial Reporting  Shareholders’ equity: initial investment in the business entity in the form of cash or property  Share: document that represents ownership in the corporation  Shareholders: owners John Wiley & Sons Canada, Ltd. ©2011 Users of Financial Statement Information  Internal users: • Management • Board of Directors  External users: • Shareholders • Other corporations, including competitors • Potential investors • Creditors • Security analysts • Credit-rating agencies • Regulators • Taxing authorities • Labour unions • Journalists John Wiley & Sons Canada, Ltd. ©2011 Development of Accounting Standards  IFRS •International Financial Reporting Standards •Set by International Accounting Standards Board (IASB) in junction with International Organization of Securities Commissions (IOSCO) •Canadian public companies must adopt IFRS by January 1, 2011. John Wiley & Sons Canada, Ltd. ©2011 Characteristics of Accounting Information  Understandability  Reliability  Comparability • Faithful Representation  Relevance • Predictive value • Substance over form • Confirmatory value • Neutrality • Prudence • Completeness John Wiley & Sons Canada, Ltd. ©2011 Constraints of Accounting Information  Timeliness  Balance between benefits and cost  Balance between qualitative characteristics John Wiley & Sons Canada, Ltd. ©2011 Business Activities  Financing Activities  Investing Activities  Operating Activities John Wiley & Sons Canada, Ltd. ©2011 Financing Activities  Borrowing money  Repaying loans  Issuing shares  Repurchasing shares  Paying dividends on shares John Wiley & Sons Canada, Ltd. ©2011 Investing Activities  Purchase or sale of property, plant, and equipment  Investments or sale of investments in the shares of other companies John Wiley & Sons Canada, Ltd. ©2011 Operating Activities  Sales to  Payments of customers amounts owed to suppliers  Collections of amounts owed by  Payments of customers expenses  Purchases of  Payments of taxes inventory John Wiley & Sons Canada, Ltd. ©2011 Annual Report  Corporate profile  Message to shareholders  Management’s Discussion and Analysis  Board of directors and management  Financial section John Wiley & Sons Canada, Ltd. ©2011 Financial Section Components  Statement of Management’s Responsibility  Auditor’s report  Financial statements  Statement on corporate governance John Wiley & Sons Canada, Ltd. ©2011 Statement of Management’s Responsibility  Contains a statement by management that it is responsible for the contents of the annual report  Outlines steps taken to ensure safekeeping of assets and the practice of ethical and responsible management John Wiley & Sons Canada, Ltd. ©2011 Independent Auditors’ Report  Independent professional accountants’ opinion about the fairness of the presentation and conformity to accounting guidelines  Ethical considerations John Wiley & Sons Canada, Ltd. ©2011 Financial Statements  Statement of Comprehensive Income •Income Statement; Statement of Earnings  Statement of Financial Position •Balance Sheet  Statement of Cash Flows  Statem
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