Acct1501 Notes

ACCT1501

Financial

 accounting:

  • Purpose:

 produce

 useful

 info

 used

 in

 many

 &

 varied

 ways

  • Info

 generated

 used

 to

 improve

 decision-­‐making

 in

 allocating

 scarce

 resources

  • External

 focus,

 often

 used

 by

 parties

 external

 to

 enterprise

 e.g.

 shareholders,

 investors,

 bankers,

 legislators,

 employees

  Management

 accounting:

  • Oriented

 towards

 helping

 managers

 &

 others

 inside

 enterprise

  Financial

 performance:

  Link:

  • Generating

 new

 resources

 from

 d-­‐t-­‐d

 operations

 over

 period

 of

 time

  • Good

 performance

 à

 healthy

 fin.

 position

  (profits

 build

 up

 resources)

  Financial

 position:

  • Healthy

 fin.

 position

 à

 performance

  • Enterprise’s

 set

 of

 fin.

 resources

 &

 obligations

 at

 point

 in

 time

  (resources>obligations,

 undertake

 activities

  à

 good

 performance

  Financial

 statements:

  • Reports

 describing

 fin.

 performance

 &

 position

  • Provided

 to

 external

 decision-­‐makers

 e.g.

 investors,

 creditors,

 customers

  • Prepared

 by

 managers,

 bookkeepers

 &

 clerks,

 accountants

  Notes:

  • Part

 of

 statements,

 adds

 explanations

 to

 numbers

  KEY

 FINANCIAL

 STATEMENTS

  BALANCE

 SHEET

  • Reports

 fin.

 position

 of

 entity

 at

 particular

 point

 in

 time

  • Entity’s

 resources

 &

 how

 they

 were

 financed

  • Accounts

 are

 permanent

  • Provides

 info

 about:

  − Fin.

 structure

 (mix

 of

 debt/equity)

  − Liquidity:...