chapter 1



After studying this chapter, you should be able to:

  1. Define accounting and understand its relationship to economic decision-making.
  2. Understand what an annual report is and what it contains.
  3. Describe the major forms of business organization in which accounting is used.
  4. Identify several users of financial statements and begin to understand how they use accounting information.
  5. Know what the terms “generally accepted accounting principles” (GAAP) and “international financial reporting standards” (IFRS) mean.
  6. Identify the qualitative characteristics and constraints of accounting information.
  7. Describe the three fundamental business activities.
  8. Identify the major financial statements and describe their main components.
  9. Begin to understand the role of ethics in financial accounting.

Principle of Caution Fuels Growth

Fashion retailer H&M was established in Västerås, Sweden, in 1947 by Erling Persson. Its philosophy—to bring fashion and quality at the best ...

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