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Chapter 1

Management and Organizational Studies 1023A/B Chapter Notes - Chapter 1: Balance Sheet, Cash Flow, Retained Earnings

Management and Organizational Studies
Course Code
MOS 1023A/B
Maria Ferraro

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Chapter 1 Purpose and Use of Financial
Accounting Matters:
Accounting the information system that identifies and records the
economic events of an organization and then communicates them to a
wide variety of interested users
“the language of business”
quantifies costs and explains why a product or service costs
what it does
Users and Uses of Accounting:
Internal Users
Plan, run and organize companies
Include: finance directors, marketing managers, HR
personnel, production supervisors and company officers
Commonly asked questions by internal users:
o Is there enough money to pay bills
o What price should I sell product at?
o How many employees can we hire?
External Users
Investors use info to make decisions to buy, hold or sell
their ownership interests
Creditors use info to evaluate the risks of granting credits
to the company
o Investors and creditors are main users of accounting
Commonly asked questions:
o Is ther company earning enough to give returns on
o Will the company be able to pay its debt as they come
o Can the company afford the pay raise we are asking
Forms of Business Organizations:
A business owned by one person
Simple to set up and gives owner the control over the
Small amounts of capital needed to start-up
Owner receives any profits, suffers losses and is personally
liable for all debts of business
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