Y5 T1 Fairman Acc. Chapter 1.pptVIP

EXAMPLE PROBLEM #1 - 1 What are the six major business disciplines? ACCOUNTING… EXAMPLE PROBLEM #2 - 1 What are the two types of accounting? TYPES OF ACCOUNTING USERS OF ACCOUNTING INFORMATION EXAMPLE PROBLEM #3 - 1 What are some examples of external and internal users? THE PURPOSE OF ACCOUNTING The purpose of accounting is provide information to decision-makers, whether they are external or internal. BASIC CORPORATE STRUCTURE EXAMPLE PROBLEM #4 - 1 What is the overall goal of the firm? STOCKHOLDERS AND THE BOARD OF DIRECTORS The board’s duty is to ensure that managers act in the interest of shareholders. When boards do their duty in monitoring management, the corporate form of organization is effective. CREDIBILITY AND THE ROLE OF AUDITING The separation of owners and managers creates potential problems in getting truthful information about the performance of a company. Shareholders must rely on managers to tell the truth. The auditor examines the information that managers use to prepare the financial statements and provides assurances about the credibility of those statements. SOCIAL RESPONSIBILITY II Only through attention to the legitimate concerns of the firm’s various stakeholders can it attain its ultimate goal of maximizing shareholder wealth! A stakeholder is defined as any person or group that may be affected by the firm’s actions. EXAMPLE PROBLEM #5 - 1 True or False. Explain. All stakeholders are shareholders and all shareholders are stakeholders. EXAMPLE STAKEHOLDERS FINANCIAL STATEMENTS… FINANCIAL STATEMENTS SHOULD BE: Objective Relevant Reliable Comparable Understandable EXAMPLE PROBLEM #6 - 1 What are the four financial statements in accounting? FOUR FINANCIAL STATEMENTS Income Statement Balance Sheet Cash Flow Statement Statement of Changes in Equity FINANCIAL STATEMENTS DEFINED The Balance Sheet (or Statement of Financial Position) is a list of the assets, liabilities, and owners’ (stockholders’) equity as of a specific date, usually at the c