accounting theory 1,chapter 1
1.
Several types of entities provide financial information to a variety of external users. Our primary focus in this book is on the financial information that profit-oriented companies provide to present and potential investors and to creditors. These profit-oriented companies also provide financial information that is used by financial intermediaries such as financial analysts, stockbrokers, mutual fund managers, and credit rating agencies.
Not-for-profit organizations also provide financial information to external users such as citizen groups and donors.
As an individual, you provide financial information to the internal revenue service and to creditors when you seek a loan. 2.
Accounting is often thought of as the “language” used to communicate financial information about a business. The primary method that profit-oriented companies use to provide financial information to investors, creditors, and other external parties is through financial statements and their accompanying disclosure notes. The financial statements used most frequently for this purpose are the: Balance Sheet, also called the Statement of Financial Position. Income Statement, also called the Statement of Operations. Statement of Cash Flows. Statement of Shareholders’ Equity.
Starting in 2012, companies must either provide a statement of other comprehensive income immediately following the income statement, or present a combined statement of comprehensive income that includes the information normally contained in both the income statement and the statement of other comprehensive income.
3.
The three primary forms of business organization are the sole proprietorship, the partnership, and the corporation. A sole proprietorship is owned by a single individual. A partnership is owned by two or more individuals. A corporation is owned by shareholders, frequently numbering in the tens of thousands in large corporations. Although sole proprietorships and partnerships
Several types of entities provide financial information to a variety of external users. Our primary focus in this book is on the financial information that profit-oriented companies provide to present and potential investors and to creditors. These profit-oriented companies also provide financial information that is used by financial intermediaries such as financial analysts, stockbrokers, mutual fund managers, and credit rating agencies.
Not-for-profit organizations also provide financial information to external users such as citizen groups and donors.
As an individual, you provide financial information to the internal revenue service and to creditors when you seek a loan. 2.
Accounting is often thought of as the “language” used to communicate financial information about a business. The primary method that profit-oriented companies use to provide financial information to investors, creditors, and other external parties is through financial statements and their accompanying disclosure notes. The financial statements used most frequently for this purpose are the: Balance Sheet, also called the Statement of Financial Position. Income Statement, also called the Statement of Operations. Statement of Cash Flows. Statement of Shareholders’ Equity.
Starting in 2012, companies must either provide a statement of other comprehensive income immediately following the income statement, or present a combined statement of comprehensive income that includes the information normally contained in both the income statement and the statement of other comprehensive income.
3.
The three primary forms of business organization are the sole proprietorship, the partnership, and the corporation. A sole proprietorship is owned by a single individual. A partnership is owned by two or more individuals. A corporation is owned by shareholders, frequently numbering in the tens of thousands in large corporations. Although sole proprietorships and partnerships