《Financial Accounting 2th财务会计 rick Antle》ch01.pptVIP

Chapter 1 Introduction toFinancial Accounting Mark Higgins What is Accounting? The act of gathering and reporting the financial information of a company Accounting is a continual process of: Capturing financial data Organizing it Producing financial reports Who Uses Financial Information? Internal Users - managers use it to plan, organize and run a business. External Users Investors (Current and Potential) Creditors Others Taxing authorities Regulatory agencies Customers Labor unions Economic planners Uses of Financial Information An organization’s financial statements provides managers with information to determine present and future decisions. Such actions include: Granting credit Making investments Borrowing money Adhering to regulations Determining executive compensation Evaluating competition Evaluating potential litigation Framework for Constructing Financial Statements Organizational Structures Sole Proprietorship - owned by one person Partnership - owned by more than one person Corporation - organized as a separate legal entity and owned by stockholders Advantages of EachOrganizational Structure Sole Proprietorship Simple to establish Owner controlled Tax advantages Partnership Same as sole proprietorship except now with additional individual(s) the organization has a broader skill base (I.e., finance and marketing) Corporation Easier to transfer ownership or raise money No personal liability The Filters of Financial Information Economic Concepts – The economic principles guiding the construction of accounting reports. Accounting Conventions – The accounting rules that apply the economic concepts to practical situations. Institutional Context – The environment that shapes the consequences of adopting specific accounting conventions. What is a Filter? The “filters” can be viewed as the financial process the organization goes through in producing the annual report, specifically the financial statements. Framework for Understanding Ac