Accounting Midterm – MGAB01
Creditors: lend money to company (i.e local bank and other lenders)
Investors: individuals who buy small percentages of large corporations
Dividends: a portion of what the company earns in the form of cash payments
Financing activities: exchanging money with the lenders and owners
Investing activities: buying and selling supplies.
Accounting period: is the time period covered by the financial statements.
Notes (footnotes): provide additional info about the financial condition of a company, without which the
financial statements cannot be fully understood.
- Describe accounting rules applied.
- Present additional detail about an item on the financial statements.
- Provide additional info about an item NOT on the financial statements.
Appendix 1a: Three types of business organizations
1) Sole proprietorships:
- Owned by one person
- Solely earn profit from the business
- Personally responsible for business debt
- Not a legal entity separate from owners
- Owned by two or more people
- Partners personally responsible for all partnership debts
- Separate legal entity
- Responsible for its own debt
- May be public for private
International Financial Reporting Standards (IFRS): guidelines for the measurement rules used to develop
the info in financial statements (for public companies listed on foreign exchange)
The Business Operations:
Accounting: identifies and records the economic events of an organization, communicates financial info
to those running the business and outsiders.
Internal decision makers: managers
External decision makers: investors, bank’s loan officer, creditors etc.
Accounting system includes: financial accounting and managerial accounting
- Financial accounting (accounting for external decision makers): prepare four basic financial
statements and related