RSM100Y1 Lecture Notes - Inventory Turnover, Return Ratio, Revenue Recognition
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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 company’s individual units, whether departments,
-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
•Management consulting services: specialized accounting services to help
managers resolve a variety of problems in fiancé, production scheduling, etc.
•Financial statement: report a company’s 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
•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
•Paid in capital: additional money invested in the firm by its owners
•Retained earnings: net profits minus dividend payments to stockholders
Include revenue, cost of good sold, operating expense
expenses= profit “the bottom line”=net income
• Gross profit (gross margin): revenue minus its cost of good sold