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Canada (162,164)
Commerce (1,696)
Chapter 1

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Department
Commerce
Course
COMMERCE 2AB3
Professor
Aadil Merali Juma
Semester
Winter

Description
Chapter 1 Overview of Managerial Accounting The Basic Objective of Accounting  The basic objective of ACCOUNTING is to provide STAKEHOLDERS ) with useful information about a business enterprise in order to help them make rational economic decisions.  The basic objective oINANCIAL ACCOUNTING is to providXTERNAL USERS (e.g., investors, creditors, financial analysts,…etc.) with useful financial information about the financial performance health, and cash flows of a business enterprise in order to help them make investment and credit decisions.  The basic objective ofANAGEMENT A CCOUNTING is to providNTERNAL USERS (i.e., managers of a company at all levels) with financial and non-financial information about a business enterprise that help them make business decisions so as to achieve the goals of the organization. 1 Figure 1 Users of Accounting Information (Stakeholders) External Users Internal Users (They cannot access the Accounting Records) (They have access to the Accounting Records) Financial Accounting Auditing Managerial Accounting  Current owners (shareholders): Managers of the firm at all levels Need Information to make Want to know if they should hold, buy more, or sell their shares in a particular company. decisions related to:  Potential Investors: Want to know if a company is a good investment.  Creditors: (e.g., suppliers, banks, ...etc.) Planning Implementing Controlling Want to know if they should extend credit to the firm, the Pla& & Decision Performance how much to extend, and for how long. Making Evaluation  Income tax authorities: Want to know if taxable income is measured properly.  Others…. (e.g., Financial Analysts, Labor Unions, Customers, Legislators, Government regulators). Feedback Financial Statements 1. Balance Sheet measures the Financial Health of the Company. 2. Income Statement measures the Financial Success of the Company. 3. Cash Flow Statement measures the Liquidity of the Company. 1. How does a company decide on the amount of information to disclose? 2. In what format should its financial information be presented? 3. How should each item be measured? Companies must prepare the Financial Statements according to generally accepted set of rules, standards, principles, and concepts referred to as: Generally Accepted Accounting Principles (GAAP) 2 Figure 2 Managerial Accounting Planning Implementing the Plan & Controlling & Decion Making
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