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ACCT 1220 Midterm: ACCT 1220 Midterm 1 Exam Notes

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ACCT 1220
Adeel Mahmood

Accounting Midterm 1 Study Review Chapter 1: The Purpose Use Of Financial Statements Accounting: is the information system that identifies and records the economic events of an organization, and then communicates them to a wide variety of interested users. Users Uses of Accounting: Users of accounting information can be divided broadly into 2 types: internal users external users. (A) Internal Users: these users plan, organize, and run companies. for these users, accounting provides a variety of internal reports including, for example, financial comparisons of operating alternatives, projections of profit from new sales campaigns, analyses of sales cost, and forecasts of cash needs. (B) External Users: Investors use accounting information to make decisions to buy, hold, or sell their ownership interest. Lenders, such as bankers, use accounting information to evaluate the risks of lending money. Other creditors, such as suppliers, use accounting information to decide whether or not to grant credit (sell on account) to a customer. employees and labour unions want to know whether the company can provide employment opportunities and pay salaries and benefits. Customers are interested in whether a company will support its product lines and honour product warranties. Taxing authorities and regulatory agencies also want to know about a companys financial accounting information. (C) Ethical Behaviour By Users: In order for financial information to have value to its users, whether internal or external, it must be prepared by individuals with high standards of ethical behaviour. Ethics in accounting is of the utmost importance to accountants and decision makers who rely on the financial information they produce. Accountants and other professionals have extensive rules of conduct to guide their behaviour with each other and the public. (In addition, many companies today have codes of conduct that outline their commitments to ethical behaviour) 1) Recognize an ethical situation 2) Identify and analyze the main 3) Identify the alternatives, and and the ethical issues involved. elements in the situation. weigh the impact of each alternative on various stakeholders. Use your personal ethics or an Identify the stakeholders persons Select the most ethical alternative, organizations code of ethics to or groups who may be harmed or considering all the consequences. identify ethical situations and issuesbenefited. What are the Sometimes there will be one right Some business and professional responsibilities and obligations of answer. Other situations involve organizations provide written codes the parties involved? more than one possible solution. of ethics for guidance in common These situations require an business situations. evaluation of each alternative and the selection of the best one.
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