AFM MIDTERM REVIEW CH1.doc

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Department
Accounting & Financial Management
Course
AFM 101
Professor
Grace Loney
Semester
Fall

Description
CHAPTER 1OwnermanagerBorrow money from bank or other lenders called creditorsInvestors individuals who buy smallof large corporationsmake their purchases hoping to gain in 2 ways First they hope to receive a portion of what the company ears in the form of cash payments called dividends Second they hope o eventually sell their share of the company at a higher price than they paidFinancing activity a company exchanges money with its lenders and ownersInvesting activity a company sells or buys propertySuppliersCustomersAccounting a system that collects and processes financial info about an organization and reports that info to decision makersInternal decision maker eg ManagersExternal decision maker parties outside the firm eg Investors in companys shares and the banks loan officer creditors suppliers customersManagerial accounting system detailed plans and continuous performance reportsinternal decision makerFinancial accounting system periodic financial stmts and related disclosuresexternal decision makerFinancial acc system provides info for managerial acc systemQuarterly reports annual reportsFour basic financial stmtsThe stmt of financial positionBalance sheet reports financial position of an acc entity at a point in time Heading name of entity title of stmt specific date of stmt unit of measurePage 5 sampleAccounting entity the organization for which financial data are to be collected often called business or corporationAssetsliabilitiesshareholders equityFinancial position economic resources that the company owns and the sources of financing or those resourcesAssets economic resources controlled by the entity as a result of past business events and from which future economic benefits can be obtained Eg Cash receivables prepayments land plant and equipment inventory investment intangible assets other assetsLiabilities entitys legal obligations that result from past business events Eg Payables shortterm borrowings accrued liabilities longterm borrowings
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