AC 305 Chapter Notes - Chapter 1: Financial Accounting, Financial Statement, Balance Sheet

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24 Oct 2016
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Financial accounting: the process of preparing financial reports for use by both internal and external parties, users of the information. Managerial accounting: communicating financial information needed by management. Information is useful to plan, control, and evaluate a company"s operations. It is important that the financial information is accurate and on time: people put money into companies, they need to know how the company is actually doing. Main purpose of financial reporting: provide financial information about the reporting entity that is useful to present and potential equity investors, leaders, and other creditors in decisions about providing resources to the entity. General-purpose financial statements: provide financial reporting information to a wide variety of users, provide the most information as possible about the company at the least cost. Entity perspective: companies are viewed as separate and distinct from their owners. Investors have claims to all of the assets of a company: proprietary perspective.

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