Key Takeaways
Chapter Review
- Financial accounting communicates financial information to external users.
- The primary objective is to provide decision-useful information.
- Financial statements include the balance sheet, income statement, statement of changes in equity, statement of cash flows, and notes.
- The accounting equation is Assets = Liabilities + Shareholders' Equity.
- U.S. GAAP is established by the FASB and is the primary reporting framework tested on the CPA FAR exam.
- Useful financial information is relevant and faithfully represented while also being comparable, verifiable, timely, and understandable.
Accounting is the language of business because it translates economic activities into information that supports better decisions.
Summary
You now understand the purpose of financial accounting, the financial reporting environment, the users of financial statements, the accounting equation, and the foundations that support the rest of the CPA FAR curriculum.