Intro to financial accounting notes
The broad aims of the course are to provide you with a sound introduction to the: It is expected that you have read the material and attempted the homework assignment before class. You should attempt more problems if you are experiencing difficulties. The homework is the minimum amount suggested to enhance your understanding of the course. Your understanding of these issues will develop as you pursue your study and career in accounting. Employees: they wish to create a demand for an extra bonus, based on the revenue earned by a firm and judge the reasonableness of their pay.Since ACC 925 is an introductory course, it is expected that you will begin to appreciate the decision-making and conceptual issues that will be introduced.Management: They wish to assess how well their decisions have transformed into useful outputs and how far have they been able to achieve the targeted results.Government: the authorities pay heed to the figures of revenue in a financial statement so that they can calculate the taxes correctly.Creditors: They wish to know the recoverability of their dues.Ques: Give examples of some users of financial statements.Īnswer –Following are some of the external users of financial statements:
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Provision for Discount on Debtors, Managers Commission and Interest on Capital.Prepaid Expenses, Accrued Income and Income Received in Advanced.Need for Adjustment, Closing Stock and Outstanding Expenses.Depreciation, Bad Debts and Provision for Bad and Doubtful Debts.Stakeholders and their Information Requirement.Distinction between Capital Revenue and Capital Expenditure.Browse more Topics under Financial Statements
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Financial statements that are being issued to outside parties may be audited to verify their accuracy. These frameworks allow for some leeway in how financial statements can be structured, so statements issued by different firms even in the same industry are likely to have somewhat different appearances. If a business has plans to issue its financial statements to outside users such as investors or creditors, the financial statements should be ideally formatted in accordance with one of the major accounting frameworks. Lastly, to investigate the particulars of certain business transactions, as mentioned in the disclosures that accompany along with the statements.Next, to help derive financial ratios from the statements that can indicate the condition of the business.Third, to help track financial results on a trend line to spot any looming profitability issues.Second, to ascertain whether a business has the capability to pay back its debts.First, to scrutinize the ability of a business to generate cash and the sources and utilization of that cash.What is the use of a financial statement?Īs a whole, financial statements fulfil the following purpose, which makes them indispensable: Explanatory notes: These include explanations of various activities, additional detail on some accounts, and other items.Cash flow statement: It helps in showing the changes in the entity’s cash flows including operating, investing and financing activities during the reporting period.It also provides information on operations carried out by the enterprise. It includes items of revenues, expenses, gains, and losses.
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However, it does not show information that covers a span of time as it shows figures of assets and liabilities on a particular date.