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Management and Organizational Studies 3360A/B- Midterm Exam Guide - Comprehensive Notes for the exam ( 42 pages long!)


Department
Management and Organizational Studies
Course Code
MOS 3360A/B
Professor
Robert
Study Guide
Midterm

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Western
Management and Organizational Studies
3360A/B
MIDTERM EXAM
STUDY GUIDE

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§ Chapter 1 Environment
Characteristics of Accounting:
1. Identifies, measures, and communicates financial information to various users
(decision makers)
-In order to compare
2. Economic entities
-Only cares how much it worth
3. Interested persons
Accounting has two classifications:
1. Financial accounting
2. Managerial accounting
Accounting theory and practice have evolved and will continue to evolve to meet
changing demands and influences (theory and practice have gap)
Financial Reporting
Financial accounting results in preparation of financial reports about business
activities
Financial reporting is used by both internal and external users
External users include such decision makers as investors, creditors, unions, and
government agencies
Managerial accounting is used by management (internal users only)
Major financial statements include:
IFRS ASPE
Statement of financial statement Balance sheet
Statement of income/comprehensive
income
Income statement
Statement of cash flows Cash flows statement
Statement of changes in equity Statement of retained earnings
-Note disclosures
Other forms of financial reporting: (not governed by GAAP)
-Presidents letter
-Prospectuses
-Government reporting (tax return)
-News releases (affects stock prices)
-Management forecasts
Accounting and capital allocation:
Financial reporting aids users in the allocation of scarce resources (capital)
-E.g. bankers: whether to call you a loan, increase/decrease your interest rate
The accounting profession has the responsibility of measuring a companys
performance accurately, fairly and on a timely basis
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These measurements enable investors and creditors to compare the income and assets
employed by companies
Investors can them assess the relative risks and returns associated with companies
In Canada, the primary exchange mechanisms for allocating resources are:
oDebt and equity markets (e.g. TSX)
oFinancial institutions (e.g. banks)
-banks care only about themselves, indicating in the bank statement: we put
money in the bank = credit on bank statement; we take money out = debt on
bank statement
oFor small businesses
An effective process of capital allocation is critical to a healthy economy (relevant
reliable, timely info)
Unreliable and irrelevant info leads to poor capital allocation
Credit rating agencies use accounting to rate companies financial stability
This gives investors and creditors additional independent info
Stakeholders in Financial Reporting:
Parties who have sth at risk (stake) in the financial reporting environment
Key stakeholders: traditional users of financial info
oInvestors, creditors, auditors, employees, regulators, analysts, management,
standard setters etc.
Broader definition of users: anyone who prepares, relies on, review, audits, or
monitors financial info
Includes both internal and external parties
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