The Big Picture
Accounting Principles and Concepts | The Accounting Equation | The Financial Statements
Accounting is often said to be the language of business. As you study any business subject, you will find this to be true. The terminology and concepts learned in this course are used in many other business courses. You'll also hear them in the news and read them in the newspaper. Read an article in Business Week or the Wall Street Journal, and you'll find many terms that you will also see in the lectures and textbook used for this course.
The financial perspective of a business that is presented by accounting becomes a major tool for decision-makers of many types, both inside and outside of the business. For instance, managers use financial statements to make decisions about production and pricing products, and investors use financial statements to help them decide in which company to invest their money. The uses of this information are numerous.
This week is about the big picture of accounting. We will obtain a broad understanding of accounting and financial statements, and how they fit into business. As we study future chapters, we will learn more details of the underlying concepts and the procedures on which they are based, as well as more about their uses.
Accounting Principles and Concepts
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Accounting is based on a set of standards called GAAP, which is an acronym for Generally Accepted Accounting Principles. GAAP is based on principles, and it is the rule book for accounting. In this course, we won't work with the specific GAAP rules, but we will learn the assumptions, concepts, and principles on which these standards are based.
There are two other important acronyms related to accounting: FASB and SEC.
FASB stands for The Financial Accounting Standards Board, which is a government-appointed committee that is responsible for determining and interpreting GAAP. They are an important group of people made up of primarily...