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is a a system of maintaining records of a company's operation and communicating that information to decision makers.
two primary functions, to measure business activities of a company & communicate those measurements to external parties for decision making purposes.
INVESTORS & CREDITORS
- Make decisions related to buying and selling company stock
- Make decisions related to lending money to the comany>
resources owned by company.
amounts owed to creditors
owners claims to resources
distributions to stockholders (cash payments)
business owned by one person.
- periodic reports published by the company for the purpose of providing info to external users.
- 1)income statment 2)statement of stockholders equity 3) balance sheet 4)statement of cash flows
- fin-stat: reports the company's revenues and expenses over and interval of time.
- (Revenues - Expenses = Net income)
- financial statement that presents the financial position of the company on a particular date.
- (Assets=Liabilities+Stockholders Equity)
STATEMENT OF CASH FLOWS
fin-stat:measures activities involving cash receipts and cash payments over and interval of time.
cumulative amount of net income earned over the life of the company that has not been distributed to stockholders and dividends.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
rules of financial accounting in USA
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
standards being developed and promoted by the international accounting standards board.
SECURITIES & EXCHANGE COMMISSION (SEC)
1934 designed to restore investor confidence in financial accounting.
trained individuals hired by a company as independent party to express a professional opinion of the accuracy of the company's financial statements.
SARBANES-OXLEY ACT (SOX)
provides regulation of auditors and types of services to clients, increases accountability of corporate executives, addresses conflicts of interest for securities analysts, and provides for stiff criminal penalties for violators.
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