Textbook Notes (368,497)
Canada (161,927)
MGAB01H3 (126)
Daga (4)
Chapter 1

Chapter 1 mgtbo5

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Financial Accounting

chapter 1 Creditors- lenders, borrow funds from investors- individuals who buy small percentages of large corporations. dividends- portion of what company earns as cash payments also, buy shares to sell for a higher price creditors gain from their lending by charging interest exchanging money with lenders and owners is a financing activity buying property and equipment is a investing activity The business Operations provider of resources- suppliers sells products and services to customers The accounting system members within the corporation -internal decision makers parties outside the firm are external decision makers. eg. investors, loan officers managerial/management account- develop accounting information for internal decision makers. financial accounting- producing account information for external users. the statement of financial position statement of financial position- reports the financial position of an accounting entity at a point in time organization that financial information and reports are collected from is the accounting entity often called the business or corporation. shows financial position and a specific point in time basic accounting equation: Assets = Liabilities + shareholders' equity trades payable- purchase of goods from supplier on credit without formal written contract (note) provisions- estimated amounts payable in the future, timing and amount depends on future events the statement of comprehensive income reports the change in share holder's equity fro business activities other than investments by shareholders or distribution to shareholders accounting period- the time period covered by the financial statements revenues-Expenses=profit Cost of sales- includes ingredients, wages paid to factory workers, and portion of the cost of buildings and equipment, and tools.(depreciation) statement of changes in EQuity reports all changes in equity during an accounting period. retained earnings- profits that have been earned since the creation of the company but not distributed yet to shareholders as dividends. beginning retained earnings + profit-dividends = ending retained earnings retained earnings is a important source of financing, half of nestle's financing. statement of cash flows divided into cash inflows(receipts) and outflows ( payments) into three categories 1) operating 2) investing 3) financing +/- cash flows from operating activities +/- cash flows from investing activities +/- cash flows from financing acitivies _________________________________ change in cash statement of cash flow useful for predicting future cash flows indicates company's ability to generate cash from sales to meet current cash needs. MARKETING managers and credit managers use customers financials t o decide whether to extend credit. purchasing managers analyze financial statement notes(footnotes)-provides supplemental information about the financial condition of a company, without which the financial statements cannot be fully understood. 3 types of notes 1) provides description of accounting rules applied in the company's statements 2) presents additional details about a line on financial statement e.g nestle's inventory note indicates costs of raw material and supplies that are in process of beign complete are ready for sale to customers. 3) additional financial disclosure- about items not listed on the statements themselves price/earnings ratio measures the multiple of current year's earnings that investo
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