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1 - Financial and Managerial Accounting Information - YouTube
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my name is Larry Walther and this is
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principles of accounting dot-com chapter
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1 in this module we're going to look at
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the nature of financial accounting and
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managerial accounting let me begin with
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a definition of accounting accounting is
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a set of concepts and techniques that
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are used to measure and report financial
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information about an economic unit the
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emphasis is on an economic unit
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ordinarily that would be a corporation a
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partnership a sole proprietorship it's
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important that we're talking about
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concepts and techniques within this
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definition you may at this point in your
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study of accounting be thinking of
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accounting is primarily bookkeeping or a
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processing certainly the methods or
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techniques are an important part of
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accounting but beyond that the ideas or
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concepts that underlie accounting become
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very important and really form the
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robust part of the accounting profession
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we also think about how to measure and
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report that's the largest objective of
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accounting is how to measure report I
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want to use this device to demonstrate
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the point that I'm trying to make about
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measuring reporting if you think about
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the company that deployed the huge
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investment to put up the cell towers and
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create the technology to allow these
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devices to occur in the process by which
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they recover that through sales you see
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you've got a huge investment up front
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that's going to be recovered later
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through a revenue stream and that
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revenue stream becomes very complex if
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you perhaps buy an item like this for a
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nominal amount 100 or 200 or 300 dollars
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that's perhaps well below the company's
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cost to produce this item and certainly
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doesn't consider the huge investment in
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infrastructure that that supports these
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devices obviously the way that companies
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that sell them recover their monies
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through continuing monthly fees or
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service plans associated with these so
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the customer that buys this at a bargain
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price is also expecting to have to pay
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for a two or three year contract and so
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the question becomes if you were the
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company the cellular provider in this
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case how would you recognize how would
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you measure the revenue for each
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particular month a quarter a year and
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how would that be reported for financial
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reporting purposes information is useful
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to business managers owners creditors
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governmental units financial analyst
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employees labor unions and so forth
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there's a broad group of interested
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parties in accounting and from a
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which largely leads to a division of
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accounting between considering it as
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either financial accounting in nature or
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managerial accounting in nature
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financial accounting is targeted toward
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external users because external users
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don't control the particular information
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flow that they're receiving its instead
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based upon standardized rules and those
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rules in the United States are developed
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by the Financial Accounting Standards
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Board or FASB or sometimes simply called
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the faz B it's a private sector group
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not a governmental group that's
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respected and honored however in terms
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of reporting practices and procedures
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the F as B's global counterpart is the
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International Accounting Standards Board
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we often talk about the rules practices
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and procedures that define accepted
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accounting practices as simply being
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generally accepted accounting principles
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our GAAP on the global basis we refer to
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this as international financial
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reporting standards or IFRS the
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recognize that the IASB and the FASB are
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working on a project of global
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convergence that will lead to
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harmonization of accounting standards as
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well as perhaps even the unification of
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the standard-setting bodies into a sting
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single standard setting body at some
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uncertain future date standardization is
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very much needed in this age of global
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exchange and global investment it's
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simply imperative that all parties play
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by the same rules book in terms of
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preparing and presenting accounting
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information to facilitate those global
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business transactions in a meaningful
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way
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jereal accounting is targeted toward
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specific needs of management it's often
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called internal reporting or our cost
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reporting and has areas of emphasis
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business planning business controlling
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specific decision-making should I make a
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capital investment a new machinery
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Arshad I simply go along with the
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machinery I've got it is not nearly a
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structure there's no particular set of
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rules that drives our guides managerial
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accounting is instead based upon the
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needs of management of a particular
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company whether we're talking about
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financial accounting or managerial
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accounting recognize that there's a need
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for a strong information system to
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reliably capture and summarize business
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information I mean over the last 20 and
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30 years we've seen huge strides in the
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quality and character of information
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systems this is really reshape to
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accounting it's far less of a
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bookkeeping record-keeping tasks the
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computer handles much of that now it's
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more dynamic decision making based
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discipline not a bookkeeping task there
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are limitations to accounting that you
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ought to be aware of upfront first of
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all it's not a hard science it is a
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social science it involves subjective
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judgments and estimations that are
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necessary to develop specific accounting
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measurements for a particular period of
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time there are interesting issues
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related to valuation and accounting
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should amounts be measured at historical
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cost or fair value historical cost is
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basically saying those transactions and
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events occur we capture the cost at that
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time and we maintain that in the
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accounting records as a basis of an
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objective verifiable and reliable
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measure for reporting purposes the
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counter-argument to that is though that
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fair value accounting although is
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subjective it forms a more relevant
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basis for measurement and this is
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another area where we're going to see
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significant changes in the accounting
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over the next decade or so
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in terms of an evolution toward fair
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value accounting so it's a dynamic
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discipline and I hope you enjoy your
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study of accounting I hope this first a
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module that differentiates between
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internal and external reporting
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managerial versus financial accounting
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is helpful in getting you off on the
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right foot and your studies of
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accounting
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you
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