...Net income/loss. Past net income provides info for predicting future net income. Net income is needed to determine the ending balance in retained earnings. RE: stmt. shows amts and causes of changes in RE during the period. Time period is the same as that covered by the income stmt. Users can evaluate dividend payment practices. Ending balance in RE is needed in preparing the balance sheet. BS: Reports assets and claims to assets at a specific point in time. Assets=Liab+SE. Lists assets first, followed by Liab and SE. U.S. companies that are publicly traded must provide shareholders w annual report. Annual Report always includes: Financial stmts, mgmt. discussion&analysis, notes to financial stmt, auditor’s report. Mgmt discussionAnalysis: comp. ability to pay near-term obligations, ability to fund ops.&expansion, results of ops. Mgmt must highlight favorable or unfavorable trends & identify significant events and uncertainties that affect these three factors. International standards are referred to as International Financial Reporting Standards(IFRS) made by the International Accounting Standards Board(IASB). IFRS more...
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...CSR Management Accounting Performance reporting and evaluation Accounting Truth? Story? Meaning? Effects on stakeholders/society? Food for thought/evaluation? Buy Apple products? Invest in Apple? Work at Apple? Cooperate with Apple? Future of Apple? Management/Leadership-lessons? Account: noun 1. an oral or written description of particular events orsituations; narrative: an account of the meetings; an account ofthe trip. 2. an explanatory statement of conduct, as to a superior. 3. a statement of reasons, causes, etc., explaining some event. 4. reason; basis: On this account I'm refusing your offer. 5. importance; worth; value; consequence: things of no account. EXPAND verb (used without object) 12. to give an explanation (usually followed by for ): to accountfor the accident. 13. to answer concerning one's conduct, duties, etc. (usuallyfollowed by for ): to account for the missing t ypewriters. 14. to provide a report on money received, kept, and spent. 15. to cause (usually followed by for ): The humidity accounts forour discomfort. His reckless driving accounte d for the accident Basic dichotomy of accounting: some results of actions taken are significant and need to be recorded and some are not Not recorded externalized; effects do occur but are not the company’s responsibility Environmental audit: a complete understanding of the environmental impact of organisational activity and costs assigned to effects Mushroom growers abues avoiding...
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...Emission allowances and the related accounting issues Laura Chilian April 5, 2012 For many years, the Securities and Exchange Commission (SEC), and the International Financial Reporting Standards (IFRS), tried to establish a proper accounting treatment for emission allowances. The mechanism for these credits is based on a simple ‘cap and trade’ idea. The government issues a number of credits to each company based on the amount of greenhouse gases emitted. Issuing a lower number of credits than needed creates scarcity, which makes trade possible. Companies that emit more gases than they were allowed will pay a fine or buy more credits. Situations are reversed if companies use less credits than they should have. This creates a market-based system on an international level (“Emission Trading Schemes” 2). The first accounting conflict arises from the nature of these allowances. They could be considered assets held for use, grants from the government for the value of the allowances, or a liability/promise to deliver allowances equal to the emissions that have been made. Considering this, emission allowances can not be categorized as either net assets or net liabilities. Due to the lack of authority, accounting practitioners create diversity (“Emission Trading Schemes” 5). Two models or treatments are developed to account for these rights. 1) The inventory model: when...
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...Application of Financial Statement – Balance Sheet Sharrone Caldwell Financial Accounting Strayer University – Online Campus Professor Lori Perez February 22, 2012 Abstract This paper focuses on the importance of a balance sheet and how it can be applied to everyday life. Managers can also benefit from the understanding of the balance sheet when making importance decision about the operations of a business. Additionally, financial statements such as the balance sheet and income statement both will serve as significant components in the operation of my own future talent agency business. Introduction The financial statement is essentially the ending result of the accounting process, which gives a summary of the financial position and performance of an organization in an organized way. A financial statement provides a summary of the operations of the business. Furthermore, financial statements provide information on where a company’s money originated from, how it is used, and where it is currently. Financial statements are also used in formulating companies’ annual reports. Corporate managers/management communicate financial information to its, owners, and various external concerned parties (stockholders/investors, employees, government, IRS, etc.). With that in mind, there are two primary types of financial statements: balance sheets, and income statements (Investopedia,...
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...definition of accounting: Accounting is a set of concepts and techniques that are used to measure and report financial information about an economic unit. The economic unit is generally considered to be a separate enterprise. The information is reported to a variety of different types of interested parties. These include business managers, owners, creditors, governmental units, financial analysts, and even employees. In one way or another, these users of accounting information tend to be concerned about their own interests in the entity. Business managers need accounting information to make sound leadership decisions. Investors hope for profits that may eventually lead to distributions from the business (e.g., “dividends”). Creditors are always concerned about the entity’s ability to repay its obligations. Governmental units need information to tax and regulate. Analysts use accounting data to form opinions on which they base investment recommendations. Employees want to work for successful companies to further their individual careers, and they often have bonuses or options tied to enterprise performance. Accounting information about specific entities helps satisfy the needs of all these interested parties. The diversity of interested parties leads to a logical division in the discipline of accounting: financial accounting and managerial accounting. Financial accounting is concerned with external reporting to parties outside the firm. In contrast, managerial accounting is primarily...
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...Employee, who is the company’s primary assets, is the secret in the sauce and the glue that holds the corporation together (Back, 2010). However, despite the importance of the employees, the companies do not include them as an asset in the balance sheet where all the other assets are being recorded (Kaye, 2012; McGrath, 2010). Employees are considered as an intangible asset to the company (Back, 2010). There are some reasons why employee is not or should not be include in the balance sheet as an asset. Many intangibles such as employees are not owned by the company in the first place (Adams, 2010; Kaye, 2012). Adams (2010) also stated that, a company can only put assets for which it has a clear ownership right on its balance sheet where employees do not meet that test. Furthermore, since there is no financial transaction creating the intangibles, the dollar value of intangibles can be difficult to identify (Adams, 2010). In basic accounting, we can see that accounting entries are made when there is money involve such as when the firm buys something, money is deducted from bank and the expense get booked to an expense or investment (Adams, 2010). However in most cases, intangibles are created outside the monetary system. McGrath (2010) mentioned that, value is created when employees learn something, but other than the employee’s salary, there is no financial transaction. Moreover, valuing employees or human capital is a very difficult task (McGrath, 2010; Weatherly, 2003). Weatherly...
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...many leases and company balance sheets as they are always interested in making valued judgements of their financial position with the current leasing disclosure requirements providing some discrepancies for creditors in making these risk evaluations. These issues surrounding the treatment and disclosure of leases provide the need for rigorous speculation into the accounting treatment and classification of the different types of leases so that the users of financial statements are provided with a clear view of a firm’s financial position and performance. With the relative ease in which a company can manipulate the classification of their leases, it makes it hard for creditors to make valued judgements of a company’s balance sheet. The current guidelines of AASB 117 require a company to classify its leases as either a finance lease or an operating lease. Only finance leases are required to be disclosed on a company’s statement of financial position with operating leases being excluded. This is one potential issue arising for creditors as the balance sheet might therefore be an unreliable measure of a company’s financial position. Operating leases are a form of off-balance sheet reporting that “potentially enhances the appearance of firm performance and financial position” (Altamuro, Johnston, Pandit & Zhang, 2014). Dhaliwal, Lee & Neamtiu (2011) state that “Operating leases are, for many companies, the largest type of off- balance sheet items” which truly shows the difficulty...
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...corporation is referred to as the parent company. B The interest not held by the parent company is referred to as the noncontrolling interest. C A corporation whose outstanding voting stock is over 50% owned by another corporation is a subsidiary of that corporation. D GAAP states that the acquisition of additional shares of a subsidiary is recorded by an increase in the investment account and a reduction of the noncontrolling interest, based on the carrying amount of the noncontrolling interest at the additional acquisition date. APIC is adjusted for any difference between the price and the carrying amount. E The parent company and subsidiary exist as separate legal entities and maintain separate accounting records. However, each reporting period their separate accounting records are combined into one set of consolidated financial statements for reporting the financial position and results of operations of a consolidated reporting entity. 1 Consolidated financial statements are prepared for all the companies under the control of a single management team to reflect a single reporting entity with multiple divisions. 2 The purpose of consolidated financial statements is to present fairly, primarily for the benefit of the owners and creditors of the parent company, the results of operations and the financial position of a parent and all its subsidiaries as if the consolidated group were a single entity. 3 The subsidiary will continue to report...
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...Determining Financial Viability Accounting and finance are closely related to a certain extent in which both deal with the financial aspects of a company. Accounting and finance work together in creating “a company’s budget or working capital analysis” (Wise-Geek, 2012, p. 1). Accounting involves recording of an organizations operations of a business as well as showing the information in the outline profit and loss accounts, which demonstrates the gain or loss of the organizations throughout the year. In addition, accounting includes provisions of a balance sheet replicating the monetary positions of a business at a specific time period. It should provide clear and precise figures about the proprietary and financial condition in a specific entity. Finance is a wider view and uses information, which is obtainable in the accounting area such as “profit and loss, balance sheet, and cash flow statement” (Parikh, 2011, p. 1) to decide upon financially linked judgments, for instance how to increase funds for upcoming plans of a business. These statements provide a valuable amount of information for a company. The statistics retained in these statements assists financial directors with analyzing past performance as well as future inclinations of a business. Both accounting and finance must be used together to make effective decisions for a company therefore, finance uses past statistics from the accounting aspect to formulate future decisions. In order to determine financial viability...
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...Accounting Equation Paper HH ACC/300 October 19, 2015 Douglas Hartman Accounting Equation Paper Whether the size of the organization is big or small, this organization must deal with financial statements; such as transactions coming in and transactions coming out that are going to impact the organization’s financial standing. In all the organizations, the accounting department plays a major role to ensure the organization’s succeed. The key role of the accounting department is to inspect records and track all the transactions that ate happening. Liabilities and Owner’s equity are the resources that are used to make the organization’s assets and accounting equation. Capitals influence owner’s equity; for example, issuing stocks. Once the business is up and running, income and also expenses will be added to the balance sheet (Tracy, 2015). Assets incorporate everything the organization maintains. There are two kinds of assets: the tangible assets such as property and equipment and intangible assets such as trademarks ("Asset", 2015). Liabilities are obligations the organization has, to different organizations or people. These account holders could incorporate merchants, workers, or financial foundations that lent cash. Equity is alluded to as capital and comprises of assets and any obligations owed to the business from external sources. To comprehend the accounting equation, the accounting division, and administration we must see how these identify with each other...
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...Running Header: Week 1 FASB Assignment FASB Pre-codification standards Summary-Statement of Financial Accounting Standards No. 168 Statement of Financial Accounting Standards No. 168 was issued in June 2009. This statement became effective for financial statements issued for interim and annual periods ending after September 15, 2009. The statement replaces FASB Statement No. 162, The Hierarchy of Generally accepted Accounting Principles. FASB Accounting Standards Codification is the source of authoritative U.S.GAAP accounting and reporting standards for nongovernmental entities. Please note the guidance issued by the Securities and Exchange Commission (SEC) is also used by public entities. FASB Accounting Standards Codification considerably changed the way financial statement preparers, auditors and academics perform accounting research. In addition, the FASB no will no longer issue new standards as Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. FASB now issues Accounting Standard Updates also called ASU’s. FASB Accounting Standards Codification restructured the accounting and reporting standards in a way that simplifies all authoritative U.S. GAAP by formatting the standards in a topically organized structure. The FASB Codification reorganized the thousands of U.S. GAAP pronouncements into approximately 90 accounting topics and displays the topics using a consistent structure. It also includes relevant Securities and Exchange Commission guidance...
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...Why Contingent assets are not on balance sheets. It is a key principle for accountants to give a fair and true view of a business to help people that use this information to make more informed decisions. It is important to provide the users, accurate financial information that is as close to the true circumstances as possible and so not to alter the decisions of the users. Accountants produce financial statements that display all of the useful information for all user groups. One of the most common financial statements is the balance sheet. The purpose of the balance sheet is to show the financial position of an entity at a certain point in time by presenting assets, liabilities and ownership interest. The balance sheet reflects the accounting equation (assets minus liabilities equals ownership interest). An asset can be defined as “a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity” (Weetman, 2006). Not all of the company assets and liabilities always appear on the balance sheet for different reasons, even though they meet the definition of an asset. These assets are called off-balance-sheet assets (OBS). The OBS is not part of the balance sheet and it acts as a note of disclosure. The OBS has featured in the headlines of many news articles. This is because businesses have been using OBS financing to keep their leverage and debt to equity ratios low. The term OBS financing became popular...
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...The Role of Accounting on Business and Our Society Stephanie R. Phillips Professor Cedano Accounting 100 February 27, 2014 When most people think of accounting, they think taxes, but accounting is so much more than that. Accountants are responsible for maintaining the financial health of our businesses. They also practice with an ethical standard that protects the public from unfair and one sided business and government practices. So next time you take your box of unsorted receipts to your tax preparer be sure to thank them for what they do the rest of the year. The four financial statements in the accounting process are an income statement; owner’s equity statement; balance sheet; and statement of cash flow (Weygandt, Kimmel, & Keiso, 2013, p. 21). Each of these statements is vital to internal and external users in order to provide relevant financial data. An income statement lists revenues and expenses that result in the net loss or income of a company during a given time frame, usually at the end of the month and the end of an accounting cycle. The owner’s equity statement accounts for any change in equity, it also records all investments and drawings made by the owner. The balance sheet shows a company’s assets, liabilities, and owner’s equity. In essence, the balance sheet shows what a company has and what a company owes. The statement of cash flow accounts for any cash in, out, or invested during the designated time period. The statement of cash flow must account...
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...Accounting is thought of by many as simply basic mathematics consisting of adding and subtracting totals to track a company’s spending and expenses; however, accounting involves so much more. Accounting comprises of a multitude of financial concepts and transactions. According to Kimmel, Weygandt, and Kieso, “accounting is the information system that identifies, records, and communicates the economic events of an organization to interested users” (Kimmel, Weygandt, & Kieso, 2011, p. 5). This system covers a broad array of information but in this paper the current and noncurrent assets will be defined, contrasted, and compared. In addition, the order of liquidity and how this practice applies to the balance sheet will be reviewed. Accounting is the means of communicating the numbers and to be successful in business the numbers have to be known “cold”. Therefore, it is imperative not only to communicate the numbers effectively but also to understand them to thrive in a world submerged with figures. Current Assets To understand assets, they first must be defined. Assets are resources such as land, computers, buildings, cash, and supplies owned by an organization. Cash is the most important asset that any business can possess. Consequently, cash is considered a current asset. Current assets are those resources that a business anticipates to replace with cash or deplete within 12 months or its operating cycle dependent upon whichever is farther away. The common practice for most...
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...Auditing a Publicly Traded Company ACC/541 June 8, 2015 MEMO TO: Manager FROM: DATE: SUBJECT: Auditing a Publicly Traded Company ________________________________________________________________________ An objective of any publicly traded corporation is to make a return. There are many influences, which can be contributed in completing this goal. The most significant factor is compliance with the accounting governing bodies, such as GAAP (Generally Accepted Accounting Principles). As an accounting firm, it is vital to examine your financial statements on a constant basis. You will need to look for the accounting handling of share-based payment and accounting consolidation theory, as it pertains to special purpose entities and consolidations (Schroeder, Clark, & Cathey, 2011). Share-Based Payments are another way for a publicly held company to offer compensation to his or her employees or other parties, without using the company’s assets. These compensation awards are usually a set number of stocks within the organization. There was already a system in place to account for these transactions, but a revision to the Statement No. 123 was made in 2004. This statement was geared toward Share-Based Payments and was released December 16, 2004, with the original Statement being published in 1995. This revision was created to provide more accurate financial information to users of publicly traded entities, such as our client. Costs incurred by share-based transactions...
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