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Western University
Management and Organizational Studies
Management and Organizational Studies 1023A/B

The purpose and use of financial statements 1/15/2013 11:30:00 AM 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. Why does accounting matter?  Accounting is the language of business  Global economic systems depend on reliable and accurate financial reporting Measures business activities Process data into reports (financial statements) Communicates results to decision makers Users and uses of accounting  Accounting identifies and records the economic events of an organization and communicates to interested users  There are two broad categories of users :Internal users
 External users users of financial information  Internal users -- internal users of accounting information plan, organize, and run companies. -- These include finance directors, marketing managers, human resource personal, production supervisors, and company officers. -- accounting provides internal reports: for example ▪ Pricing ▪ Strategic
 ▪ Marketing
 ▪ Employee compensation ▪ Capital budgeting 
▪ Resource allocation  External users Investors and creditors are the main external users of accounting information -- Investors
投资者- use accounting information to make decisions to buy, old, or sell their ownership interests -- Creditors 债权人- such as supplier and bankers, use accounting information to evaluate the risk of granting credit 售出信贷 or lending money 贷款基金. Others 
 ▪ Tax authorities
税务机关 ▪ Regulatory agencies 监管机构▪ Customers
▪ Labour unions 公会 
▪ Economic planners ▪ Communities 社区 Forms of business organization  Proprietorship
 -- Owned by one person -- small amount of money(capital) is needed to start -- personally liable (responsible) for all debts of the business. -- EX: air salons, plumbers, and mechanic , as well as farms and small retail store.  Partnership
 -- Owned by more than one person -- often formed because one person does not have enough economic resources, or because partners bring unique skills or resources. -- each partner generally has unlimited liability for all debts of the partnership. -- are typically used to organize retail and service business, including the professional practice of lawyers, doctors, architects, engineers, and accountants.  Corporation
 -- receive shares to indicate your ownership claim, become owners of share (shareholds) by investing relatively small amounts of money. -- may be public or private. -- More attractive than investing in a proprietorship or partnership because shares are easy to sell. -- public corporation—commonly distribute 分配 their financial statements 财务报表 to shareholds, creditors 债权人, other interested parties, and the general public upon request. -- private corporation – do not issued publicly traded share. Other factors -- Choose a proprietorship 所有权 or partnership, you are personally liable for all debts of the business, Pay personal income tax on their respective share of the profits, -- Shareholders enjoy limited liability since they only risk losing the amount that they have invested in the companies share. Pay income taxed as separate legal entities on any corporate profits. -- Combined number of proprietorships and partnerships in Canada is more than corporation 公司. Types of business  Manufacturing business—general motors, intel, boeing, nike, coca cola, sony.  Merchandising business—wal-mart, toy “R” US, best buy,  Service business—Disney, air Canada, Marriott hotels, Merrill lynch, rogers. Business activities  Financing activities --two primary ways of raising outside funds 筹集外部资金 for corporations are 1. borrowing money or replaying loans(debt 债务)借款或重放贷款 2. selling or repurchasing shares(equity 股权).出售或回购股票 -- the persons or the companies that the company owes money 欠钱 to are its creditors. -- liabilities 负债金额.—“outsider claims” or economic obligations payable to outsiders. -- bank indebtedness 银行债务 --short-term - note payable 票据-borrowed to purchase racks 机架 and display cabinets 显示柜. --long term - can include note payable, mortgages payables, lease obligations 租赁. -- Common share —the item used to describe the amount paid by investors for share of ownership in a company. -- shareholds have no legal right to expect any payments until all o
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