(ebook finance) - Accounting - Financial Accounting - Financial Reporting, Analysis Using Financial Accounting Information.pdf

CHAPTER
1
INTRODUCTION TO
FINANCIAL REPORTING
USERS OF FINANCIAL STATEMENTS INCLUDE A financial reports, users often pet-
company’s managers, stockholders, bondhold- ing information sources, such as new wage
ers, security analysts, suppliers, lending contracts and economy-oriented releases.
institutions, employees, labor unions, regulatory This book concentrates on using financial
authorities, and the general public. They use the accounting information properly. Users must
financial reports to make decisions. For exam- have a basic understanding of generally
ple, potential investors use the financial reports accepted accounting principles and traditional
as an aid in deciding whether or not to buy the assumptions of the accounting model in order
stock. Suppliers use the financial reports to to recognize the limits of financial reports.
decide whether or not to sell merchandise to a The ideas that underlie financial reports
company on credit. Labor unions use the finan- have developed over several hundred years.
cial reports to help determine their demands This development continues today to meet
when they negotiate for employees. Man- the needs of a changing society. A review of
agement could use the financial reports to the evolution of generally accepted accounting
determine pany’s profitability. principles and the traditional assumptions of
Demand for financial reports exists the accounting model should help the reader
because users believe that the reports help understand the financial reports and thus
them in decision making. In addition to the analyze them better.
1
2 Introduction to Financial Reporting
2 Chapter 1 Introduction to Financial Reporting
DEVELOPMENT Generally accepted accounting principles (GAAP) are accounting principles that
OF GENERALLY have substantial authoritative support: The accountant must be familiar with acceptable
ACCEPTED reference sources in order to decide whether any particular accounting princ