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provides goods or services (outputs) to customers with the objective of maximizing profits.
Business
a person or entity (such as an owner, manager, employee, customer, creditor, or the government) who has an interest in the economic performance of the business.
Business Stakeholder
are moral principles that guide the conduct of individuals.
Ethics
an information system that provides reports to stakeholders about the economic activities and condition of a business.
Accounting, called the "language of business"
are used in preparing financial statements so that stakeholders can compare one company to another.
Generally accepted accounting principles (GAAP)
views the business as an entity separate from its owners, creditors, or other stakeholders.
Business Entity Concept
requires that properties and services bought by a business be recorded in terms of actual cost.
Cost Concept
requires that the accounting records and reports be based upon objective evidence.
Objectivity Concept
requires that economic data be recorded in dollars.
Unit of measure concept
The resources owned by a business and the rights or claims to these resources
Assets
What is the Accounting equation?
Assets = Liabilities + Owner's Equity
The rights of creditors represent debts of the business
liabilities
the rights of the owners of the business
owner's equity
what are the three main components of Accounting system?
Input(Transactions)->Processing (analyze)->Output(Financial Statement)
What is the purpose of Accounting?
To provide accurate, reliable information for financial statements so people can make brighter decisions.
What are the 3 types of financial statements?
Income statements, Balance Sheet, and Statements of Cash Flow
represents money or assets the investors given to the company in exchange for ownership
capital stock
an economic event or condition that directly changes an entity's financial condition or directly affects its results of operations
business transaction
What are the principal financial statements of a corporation?
Income statement, the retained earnings statement, the balance sheet, and the statement of cash flow.
reports a period's net income or net loss, which also appears on the retained earnings statement.
income statement
a summary of the changes in the earnings retained in the corporation for a specific period of time, such as a month or a year.
Retained earnings statement
a list of the assets, liabilities, and owner's equity as of a specific date, usually at the close of the last day of a month or a year.
Balance Sheet
a summary of the cash receipts and cash payments for a specific period of time, such as a month or a year.
Statement of cash flows
Why is interrelationships among financial statements important?
It serves as a check on whether the financial statement have been prepared correctly.
Distribution of earnings to stockholders. Opposite of the stockholders' inventing in the business and do not affect the amount of net income of net loss. The payment of this reduces both cash and stockholder's equity.
Dividends
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