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FSU - ACG 2021 - Fin. Acct. Notes - Week 1 - Class Notes

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FSU - ACG 2021 - Fin. Acct. Notes - Week 1 - Class Notes

School: Florida State University
Department: Accounting
Course: Financial Accounting
Professor: Ronald Pierno
Term: Summer 2015
Tags: financial accounting
Name: Fin. Acct. Notes - Week 1
Description: These notes go over Chapter 1: Intro to Financial Statements.
Uploaded: 01/14/2018
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background image ACG 2021 – Chapter 1: Introduction to Financial 
Statements
There are six learning objectives in this chapter, and the notes will be divided using those objectives as headings. 1. Describe the primary forms of business organization. a. Sole proprietorship: a business owned by one person. i. Simple to establish ii. Owner controlled iii. Tax advantages b. Partnership: a business owned by two or more persons  associated as partners. i. Simple to establish ii. Shared control iii. Broader skills and resources iv. Tax advantages c. Corporation: a business organized as a separate legal entity owned by stockholders. 1. Advantages: a. Can attract large amounts of capital investment
b. Allows for an easy transfer of ownership
c. Can attract professional management
d. Provides stockholders with limited liability
e. Survives the death of its owner(s) (continuity of life)
2. Disadvantages a. Corporations are subject to more gov. regulations
b. Shareholders can have difficulty knowing whether 
management is making decisions in shareholders’ 
best interests
c. Corporations are subject to income taxation (double taxation) i. Easier to transfer ownership ii. Easier to raise funds iii. No personal liability 2. Identify the users and uses of accounting information. a. Accounting:     The information system that identifies, records, and  communicates the economic events of an organization to interested 
users. Its purpose is to provide economic information as inputs for 
decision making by users of the information.
b. Users are divided into 2 groups:
background image i. Internal Users: Users working inside the business 1. Marketing (What price should Apple charge for an iPod to maximize 
the company’s net income?)
2. Management  (Which PepsiCo product line is the most profitable? Should
any product lines be eliminated?)
3. Finance  (“Is cash sufficient to pay dividends to Microsoft 
stockholders?)
4. Human Resources  (Can General Motors afford to give its employees pay 
raises this year?)
ii. External Users: Users working outside the business 1. Creditors: Banks/ Bank users (Will United Airlines be able to pay its debts as they come 
due?)
2. Investors: Stock Holders (Is General Electric earning satisfactory income?) (How does Disney compare in size and profitability with 
Time Warner?)
iii. Ethics in Financial Reporting  1. United states regulators and lawmakers were very  concerned that the economy would suffer if investors
lost confidence in corporate accounting because of 
unethical financial reporting. 
a. Recent financial scandals include: Enron,  WorldCom, HealthSouth, AIG and others  b.  Congress passed Sarbanes-Oxley Act of 2002  (SOX) i. Resulted in:  1. Top management must now certify the accuracy of financial 
information 
2. Penalties for fraudulent activity was  increased  3. Independence of auditors was  increased  4. Increased oversight by the board of  directors must occur, including the 

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School: Florida State University
Department: Accounting
Course: Financial Accounting
Professor: Ronald Pierno
Term: Summer 2015
Tags: financial accounting
Name: Fin. Acct. Notes - Week 1
Description: These notes go over Chapter 1: Intro to Financial Statements.
Uploaded: 01/14/2018
6 Pages 35 Views 28 Unlocks
  • Better Grades Guarantee
  • 24/7 Homework help
  • Notes, Study Guides, Flashcards + More!
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