Notes from professor Brian Bouche in Introduction to Financial Accounting

Definition:

Three types of accounting books (classified by readers):

Financial reporting requirements (by SEC):

Financial reporting requirements:

Two Big Accounting Standards:

established by U.S. Congress, but they delegate to

SEC, then they delegate to

Financial Accounting Standards Board (FASB, in Norwalk, Connecticut), they delegate to

Emerging Issue Task Force (EITF)

America’s Institute of CPA’s (AICPA)

2. International Financial Reporting Standards (IFRS):

established by the IASB (in London)and are required in over 100 countries

Fun fact:

Management is responsible for preparing financial statements:

(The auditor for Enron is hired by Enron…….)

The SEC and other regulators take action against the firm if any violation of GAAP or other rules are found, but these regulators are usually reactive rather than proactive. They usually don’t start investigation until someone brought the problem to the public. Information intermediaries (stock analysts, institutional investors, the media) may expose or flee firms with questionable accounting.

Example of household buying a house
Example in subprime crisis

Assets are recognized when:

Liabilities are recognized when:

Dividends are not expense. When the board declare dividends but does not pay for it, it creates dividends payable liability where the owner of the dividends became creditors.

Three Fundamental Bookkeeping Equations:

Example of journal entries

I am a Machine Learning Engineer with special interest in mental health and finance.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store