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Chapter 1

Chapter 1 Midterm Review MGAB01.docx

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Financial Accounting
G.Quan Fun

Accounting Midterm – MGAB01 Chapter 1: 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 2) Partnership: - Owned by two or more people - Partners personally responsible for all partnership debts 3) Corporation: - 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
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