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Accounting Notes

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University of Toronto St. George
Rotman Commerce
John Oesch

Chapter 14 Accounting Accounting information system (AIS): an organized procedure for identifying, measuring, recording, and retaining financial information so that it can be used in accounting statements and managements report I. Financial accounting system: concerned with external users of information- consumer groups, unions, shareholders, and government agencies. -It prepares and publishes income statements and balance sheets at regular interval or statements of cash flows -All documents focus on the company as a whole rather individual departments -Summarizes financial transactions that have occurred II. Managerial accounting: internal procedures that alert managers to problems and aid them in planning and decision-making. -Reports to these users serve the companys individual units, whether departments, projects etc. -As projections and forecast of both financial data and business activities -They are forward looking Forensic accountant: tracks down hidden funds in business, usually as part of a criminal investigation. Management consulting services: specialized accounting services to help managers resolve a variety of problems in fianc, production scheduling, etc. Financial statement: report a companys financial status, fall into three broad categories: balance sheet, income statements, statements of cash flow Merchandise inventory: (asset) the cost of merchandise that has been acquired for sale to customers and is still on hand. -Accounting on merchandise inventory must make assumption about how much would be sold, and stored Prepaid expenses: (asset) include supplies on hand and rent paid for the period to come Intangible asset: include the cost of obtaining rights or privileges such as patents, trademarks, copyrights, and franchise fees Goodwill: is the amount paid for an existing business beyond the value of its other assets Owners Equity Paid in capital: additional money invested in the firm by its owners Retained earnings: net profits minus dividend payments to stockholders Income statement Include revenue, cost of good sold, operating expense Revenue expenses= profit the bottom line=net income Gross profit (gross margin): revenue minus its cost of good sold
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