Intro to Financial Accounting Final Topics

internal users of financial info

The managers who plan, organize and run a business. This could include managers, production supervisors, finance directors and company officers.

external users of financial info

Investors and creditors.

• investors use accounting info to decide whether to buy, hold or sell ownership shares of a company

• creditors use the information to evaluate the risks of granting credit or lending money

Sarbanes Oxley Act

An act passed to reduce unethical corporate behavior and decrease the likelihood of future corporate scandals 

GAAP: accounting standards, SEC: government agency that oversees major standard setting body and FASB, FASB:  Financial Accounting Standards Board

GAAP: accounting standards, SEC: government agency that oversees major standard setting body and FASB, FASB:  Financial Accounting Standards Board

Basic accounting information

Assets = Liabilities + Stockhlders’ Equity

Assets

Resources a business owns. They provide the capacity to provide future services or benefits

Liabilities

Existing debts and obligations that need to be paid off

Stockholders’ Equity

Ownership claim on a corporation’s total assets

income statement

shows revenues, expenses and net income (revenues - expenses = net income)

retained earnings statement

add net income (from income statement) - dividends to get retained earnings

balance sheet

• Reports all the assets, liabilities and stockholders’ equity at a specific date

• Lists assets at the top, followed by liabilities and stockholders’ equity