Accounting-Financial Statements Essay

Introduces the cardinal m peerless(a)tary pedagogysIncome logical argument, asseveration of unplowed up(p) gelt, equilibrium piece of paper, and parameter of coin Flows. invoice as the vocabulary of personal line of credit is talk abouted on with an mental institution of the various users of ciphering system nurture. fiscal and Managerial enumerateing ar compargond. The foursome ways to organize a railway line proprietorship, partnership, limited liability company, and corporation, ar discussed. An introduction and contrast of the mo inter doughary news report Standards get on (FASB) and the internationalistic report Standards gameboard (IASB) is done.The Entity confidence, tenacity (Going Concern) As trades unionption, diachronic Cost rationale, and Stable fiscal unit of measurement Assumption are explained. The report equality Assets = Liabilities + shareowners averageice is presented a considerable with definitions and explanation s of all(prenominal)(prenominal) component of the equation. A detail presentation of each of the four previously mentioned fiscal arguments is given. Each account classification of the fiscal statements assets, liabilities, stockholders impartiality, revenue, and expenses are thoroughly explained and examples of common account titles utilize are given.The process of evaluating a company through the use of the fiscal statements is shown. A discussion of dividing line morals in write up decisivenesss is done. An end of chapter compendium problem emphasizes the conceptualization as comfortably as witnessing of the mo gainary statements. An accounting system vocabulary section explains any the virgin accounting terms. The End of Chapter Access Your further allows the student to meet how fountainhead he grasped the data presented in the chapter. Traditional exercises and problems solidify the students pictureing of the material. statement Outline . coif a. fisc al care relationship b. Managerial Accounting c. Contrast financial and Managerial Accounting 2. Describe the users of financial information a. Individuals b. Business Managers c. Investors d. Creditors e. Government restrictive Agencies f. Taxing Authorities g. Nonprofit Organizations h. antithetic Organizations 3. Explain a. Financial Accounting Standards Board (FASB) i. Generally Accepted Accounting Principles (GAAP) b. world-wide Accounting Standards Board (IASB) i. International Financial Reporting Standards (IFRS) c. Compare GAAP and IFRS 4. set up and discuss Accounting Principles, Assumptions and Concepts a. Entity Assumption b. tenacity (Going Concern) Assumption c. Historical Cost Principle d. Stable Mo kaleary Unit Assumption 5. Introduce the Accounting Equation a. Define and discuss common account titles i. Assets ii. Liabilities iii. Stockholders Equity b. Define and discuss common account titles i. Revenue ii. depreciate iii. maintained cabbage c. Discuss s tipendiary in Capital and Dividends 6. Explain and attire the Financial Statements a. Income Statement b. Statements of hold Earnings c. Balance sheet d.Statement of bullion Flows 7. function Financial Statements to evaluate business organisation performance a. Explain the relationship among the financial statements 8. Ethics in Business and Accounting Decisions a. The role of judgment in fashioning decisions b. Economic factors c. Legal factors d. Ethical factors appoint Topics The financial statements are actually reports on how salutary or poorly a business performed during a specified uttermost of time. Chapter one actually presents the four staple fiber financial statements and other relevant information that is motifed to adequately prepare the financial statements.First one must ensure that the Financial Accounting Standards Board (FASB) develops the rules and guidelines in the United States that must be adhered to in preparing the financial statements. These gui delines are shaftn as the generally accepted accounting principles (GAAP). The International Accounting Standards Board (IASB) develops the international financial reporting standards (IFRS) which are the international or global standards. Exhibit 1-3 gives an overview of the joint conceptual framework of accounting developed by the FASB and the IASB.However, the SEC announced that it will currently require all Ameri crapper companies to survey the IFRS. This adoption is currently slated to begin the initial phase in 2014 with all companies on board by 2016. The adoption of the IFRS by all American companies will urge the process of comparing financial statements of care industries globally. Also, it will eliminate the need of umpteen companies to prepare several sets of financial statements. Accounting is often labeled as the language of business and thither are outside as wellspring as knowledgeable users of accounting information.Individuals, investors and creditors, reg ulatory bodies as well as nonprofit organizations are just some of the noted users of the accounting information. The accounting information is judge to be right as well as by the bye in order to satisfy the need of the users. There are 2 different types of accounting that is needed by the users. They are Financial Accounting and Managerial Accounting. Financial Accounting primarily provides information to the outside(a) users and managerial primarily serves the internal users. This information is utilize in each and every(prenominal) type of business organization.There is the resole proprietorship, partnership, limited liability company, and the corporation. Each of these businesses differs as far as the form of self-possession and other accounting details however, each is dependent on accurate and well timed(p) information in order to locomote at the optimum level. There are some key accounting principles, hypothesiss, and concepts used in adequately preparing the acco unting records. The inaugural one discussed in this chapter is the assumption entity. This is the rudimentary assumption, which can be taken by the users of the financial statements, that a business is a damp economic entity.Each business is treated as a separate and distinct entity to enable the accountant to adequately measure the financial performance of the business. The perseveration (Going Concern) Assumption is as well as discussed here. This is the assumption that the business will fall out to exist long enough to use the existing assets for their intend purpose. If the business does intend to continue to act upon and employ the assets as intended, it does not look at to be divulge in the financial statements. However, if there is an intention not to continue to operate it must be disclosed somewhere in the financial statements.The Historical Cost Principle is presented such that one will understand that actual appeal is used as the valuing system for all accountin g transactions. Actual cost is confirmable as well as guileless and therefore used to insure that the accounting records are prepared in a relevant as well as reliable manner. The Stable Monetary Unit Assumption is also presented in this chapter. This is the assumption that the obtain power of a one long horse bill does not fluctuate. That is, one can purchase the same amount with a dollar today that he/she could a form ago.This assumption allows the accountant to ignore pompousness and add or subtract dollars from change years without adjusting for inflation. This is sometimes difficult for students to understand because they have seen inflation as well as lagging economies however, the professor can assure the student that if needed there is a system developed to reliably compare statements from varying years. That system, however, is taught in upper berth level accounting courses. After ontogeny an understanding of this material the student is accordingly introduced t o the Accounting Equation.That is Assets = Liabilities + Owners Equity. It is imperative that the student understand the importance that this equation plays in preparing the financial statements. This equation presents the resources of a company as well as the claims on those resources. wiz must also note that this equation must be kept in balance at all times. Assets are presented as economic resources of the entity that are expected to be of future benefit. These resources have devil types of claims against them liabilities outside claims and owners equity insider claims.See demo 1-4 to attend to present the fact that the two sides must equal. The influence on stockholders equity by, paid-in capital, and kept up(p) earnings must be explained. Also, the manner in which revenue, expenses and dividends effect retained earnings should be explained. Remember to prove that dividends do not affect net income. They are not subtracted from revenue to determine the net income. Rathe r, they are subtracted from retained earnings. The financial statements are now to be presented.The Income Statement is the also referred to as the statement of operations because it measures the operating performance. It reports the revenues earned as well as the expenses incurred during a specified consequence of time. The expenses are subtracted from the revenue to determine the net income/loss for the accounting period. Net income is give tongue to to be the single most great item in the financial statements. The Statement of Retained Earnings is prepared after(prenominal) the Income Statement because the net income/loss from the Income Statement is needed to prepare the Statement of Retained Earnings.Retained earnings are plain the portion of the net income that the company has kept in the business. The Statement of Retained Earnings shows the changes that occurred in the retained earnings during the accounting period. Be sure to note that the net income is added to the c ommence retained earning balance and the dividends are subtracted in order to determine the terminate retained earnings balance. The Balance Sheet is prepared after the Statement of Retained Earnings because the end retained earnings balance is needed to prepare the Balance Sheet.Statement of Financial Position is another(prenominal) name given to the Balance Sheet because it actually measures the financial position of a company. This statement reports on the assets, liabilities, and stockholders equity of a company. A life-threatening way to help the students understand the information given by the Balance Sheet is to tell them that it gives a quick snapshot view of the financial status of the company on one day. That day is generally the end of the accounting period. The sum of the assets is expected to equal the sum of the liabilities and the stockholders equity. See exhibit 1-9.The Statement of Cash Flow measures the coin receipts and payments. This statement reports on cash flows from three major activities operating activities, investing activities, and financing activities. The net increase/decrease in cash from these three activities is then determined and added to the beginning cash balance to get the ending cash balance. In the financial statement conclusions it is important make sure the students know the purpose of each financial statement. It is also important that the students know the order of preparation as well as the formulas for each financial statement.Good business requires decision making, which in turn requires the exercise of good judgment. Making good judgments in business in general and accounting in particular should take into account not only economic, but legal and honest dimensions as well. The last section of the chapter presents an honest decision making model that is used consistently throughout the rest of the book. Use of the model emphasizes that good decisions are not always based just on the basis of how much money a company can make immediately.