...Income statement – The purpose of an income statement is to provide investors with the most accurate description of the company’s profits over a period of time. It also shows how revenues and expenses result in a net income or net loss for a specific period of time. Owner’s equity statement – The purpose of the Owner’s equity statement is the changes in retained earning that appear on the balance sheet and is most commonly influenced by income and dividends. Balance sheet – The purpose of the balance sheet tells investors and/or banks how a company is doing financially. A balance sheet shows the big picture of a company’s Assets, Liabilities and any Owner’s equity that the company has at that particular time. Statement of cash flow – The purpose of the statement of cash flow is, so a business owner is aware of any financial events that could have a reverse effect on the company’s ability to meet their obligations. A balance sheet is most effective in communicating the financial health of an organization because it shows the financial transactions of a company front one point to another. Questions: 2 A public accountants duties include preparing and verifying important financial documents, analyzing budgets and planning finances as well as bookkeeping, and auditing tasks. Public accountants can give advice and provide basic financial information from clients to corporations. Certified public accountants can do the same things that public accountant due as well as overseeing...
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...modern business. From the smallest start-up to the largest fortune 500 hundred company, accounting is how business growth, contraction, or direction is determined. When entering the accounting world you will be required to deal with the four financial statements, the balance sheet, the income statement, the statement of cash flows, and the owner’s equity statement. The purpose of the balance sheet is to reveal the economic/financial position of the company at a set point in time. The balance sheet follows the basic accounting equation, assets = liabilities + owner’s equity. The income statement is what an accountant uses to determine the operation of a business. You would take the revenues minus the expenses to determine the net income for the business. The statement of cash flow is useful in determining a business’s capability to pay its bills. It represents a breakdown of all transactions, and show how the company acquired its cash and what it is doing with it. Lastly there is the statement of owner’s equity. This statement shows the variations in retained earnings. While all of the financial statements are needed the most important would have to be the cash flows statement. Cash flows is most important because it provides you with the information needed to see if a company can meet its debt and interest payments. Keep in mind that cash flows can be determined by the balance sheet combined with the income statement. A comparison of public accounts to certified...
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...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 for where cash came from, where cash went, as well as any changes in the cash balance (Weygandt, Kimmel, & Keiso, 2013, pp. 23-24). Collectively, all statements are important in providing the most accurate financial information about the company, but the company’s “financial health” is best represented by the balance sheet (Pittelkow, 2011). The balance sheet is a summary of a...
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...Seventeenth Edition 5. Accounting for Merchandising Operations Text © The McGraw−Hill Companies, 2004 “I felt we should go into something that we had some connection to”—Dwayne Lewis (standing; Michael Cherry sitting) 5 A Look Back Accounting for Merchandising Operations A Look at This Chapter This chapter emphasizes merchandising activities. We explain how reporting merchandising activities differs from reporting service activities. We also analyze and record merchandise purchases and sales transactions and explain the adjustments and closing process for merchandisers. A Look Ahead Chapter 6 extends our analysis of merchandising activities and focuses on the valuation of inventory. Topics include the items in inventory, costs assigned, costing methods used, and inventory estimation techniques. Chapter 4 focused on the final steps of the accounting process. We explained the importance of proper revenue and expense recognition and described the closing process. We also showed how to prepare financial statements from a work sheet. Larson−Wild−Chiappetta: Fundamental Accounting Principles, Seventeenth Edition 5. Accounting for Merchandising Operations Text © The McGraw−Hill Companies, 2004 Learning Objectives CAP Conceptual Analytical Procedural merchandising activities C1 Describeincome components for aand A1 Compute the acid-test ratio and explain its use to assess liquidity. identify merchandising company. (p. 178) (p. 193) P1 Analyze...
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...Chapter 7 MerChandising Corporation assessment Questions as-1 ( 1 ) What is a merchandising business? A merchandising business can be defined as any business that buys and sells product for the ______________________________________________________________________________ purpose of making a profit. ______________________________________________________________________________ ______________________________________________________________________________ as-2 ( 1 ) What do common shares in a corporation represent? Common shares represent money invested directly in a company by its owners, who received ______________________________________________________________________________ shares of the company in return. ______________________________________________________________________________ ______________________________________________________________________________ as-3 ( 2 ) What does retained earnings in a corporation represent? Retained earnings represents all the profits that the business has retained (i.e. not paid to the ______________________________________________________________________________ owners). ______________________________________________________________________________ ______________________________________________________________________________ as-4 ( 3 ) In a perpetual inventory system, how often are inventory levels updated? A perpetual inventory system updates inventory levels after every purchase and sale. ______________________________________________________________________________...
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...result of revenues exceeding expenses and a net loss is the result of expenses exceeding revenues. The income statement does not include investment and withdrawal transactions between the owner and the business in measuring net income. The investment and withdrawal transactions of the owner are not included on the income statement when measuring net income (Weygandt, Kieso, and Kimmel, p. 23). The owner's equity statement summarizes the changes in owner's equity for the same time period that the income statement covers and indicates why the owner’s equity has increased or decreased during that time period. The data included in the owner’s equity statement is derived from the income statement. It shows the owner’s beginning equity, investments, net income or loss, and the drawings of the owner (Weygandt, Kieso, and Kimmel, p. 23). The purpose of the statement of cash flows is to provide information on the cash receipts and payments for a specific period of time. It reports the effects of a company’s operations, investing activities, financing activities, the increase or decrease of cash, and the total amount of cash at the end of the specified period (Weygandt, Kieso, and Kimmel, p. 24). The cash flow statement shows the causes of the change in cash reported on the balance sheet. The purpose of the balance sheet is to report the amount of assets, liabilities, and stockholders' equity at a...
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...recognized on the income statement. • increases its total assets and total stockholders’ equity. • has no effect on total assets and total stockholders’ equity. • decreases its total assets and total stockholders’ equity. 4. You work in marketing for a company that produces work boots. Quality control has sent you a memo detailing the length of time before the boots wear out under heavy use. They find that the boots wear out in an average of 208 days, but the exact amount of time varies, following a normal distribution with a standard deviation of 14 days. For an upcoming ad campaign, you need to know the percent of the pairs that last longer than six months-that is, 180 days. Use the empirical rule to approximate this percent. • 97.5% • 95% • 2.5% • 5% 5. __________involves ensuring proper strategic controls and organizational designs. • Corporate governance • Strategy implementation • Business-level strategy • Corporate-level strategy Find the Capstone Final Examination Part 2 answers here BUS 475 Capstone Final Examination Part 2 6. A post-closing trial balance will show: • only income statement accounts • zero balances for balance sheet accounts • only balance sheet accounts • zero balances for all accounts 7. The...
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...issue financial statements each year. 9. The dividends account is closed to the Income Summary account in order to properly determine net income (or loss) for the period. 10. After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances. 11. Closing revenue and expense accounts to the Income Summary account is an optional bookkeeping procedure. 12. Closing the dividends account to Retained Earnings is not necessary if net income is greater than dividends during the period. 13. The dividends account is a permanent account whose balance is carried forward to the next accounting period. 14. Closing entries are journalized after adjusting entries have been journalized. 15. The amounts appearing on an income statement should agree with the amounts appearing on the post-closing trial balance. 17. A business entity has only one accounting cycle over its economic existence. 18. The accounting cycle begins at the start of a new accounting period. 19. Both correcting entries and adjusting entries always affect at least one balance sheet account and one income statement account. 20. Correcting entries are made any time an error is discovered even though it may not be at the end of an accounting period. 21. An incorrect debit to Accounts Receivable instead of the correct account Notes Receivable does not require a correcting...
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...equity. 4. You work in marketing for a company that produces work boots. Quality control has sent you a memo detailing the length of time before the boots wear out under heavy use. They find that the boots wear out in an average of 208 days, but the exact amount of time varies, following a normal distribution with a standard deviation of 14 days. For an upcoming ad campaign, you need to know the percent of the pairs that last longer than six months-that is, 180 days. Use the empirical rule to approximate this percent. • 97.5% • % 5. __________involves ensuring proper strategic controls and organizational designs. • Strategy implementation 6. A post-closing trial balance will show: • only balance sheet accounts 7. The preparation of adjusting entries is: • needed to ensure that the expense recognition principle is followed. 8. In a simple linear regression model, if the plots on a scatter diagram lie on a straight line, what is the standard error of the estimate? • 0 9. The fraud triangle applies to: • U.S and international companies. 10. According to value-chain analysis, which of the following would be considered part of the general administration in a firm? • information systems 11. Which of the following can be represented by a discrete random variable? • The number of defective light bulbs in a sample of five 12. What is an advantage of the correlation coefficient over the covariance? • It falls between -1 and 1; and it...
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...Distinguish between product and period costs. Explain the difference between a merchandising and a manufacturing income statement. Indicate how cost of goods manufactured is determined. Explain the difference between a merchandising and a manufacturing balance sheet. Identify trends in managerial accounting. Prepare a worksheet and closing entries for a manufacturing company. Questions 1, 2, 3 Do It! 1 Exercises 1 *2. 4, 5, 6, 7, 8 11, 12 2, 3 1 *3. 4, 5, 7 2 2, 3, 4, 5, 6 3, 4, 5, 7, 13 8, 12, 13, 14, 15, 17 1A, 2A 1B, 2B *4. 13 6 2 1A, 2A 1B, 2B *5. 9, 14 3A, 4A, 5A 3B, 4B, 5B *6. 15, 16, 17, 18 8, 10, 11 3 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 14, 15, 16, 17 3A, 4A, 5A 3B, 4B, 5B *7. 10, 19, 20, 21 9 3A, 4A 3B, 4B *8. 22, 23, 24 25, 26 27, 28, 29 12 4 18 *9. 19 6A *Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendix to the chapter. Copyright © 2011 John Wiley & Sons, Inc. Kimmel, Accounting, 4/e, Solutions Manual (For Instructor Use Only) 14-1 ASSIGNMENT CHARACTERISTICS TABLE Problem Number 1A Difficulty Level Simple Time Allotted (min.) 20–30 Description Classify manufacturing costs into different categories and compute the unit cost. Classify manufacturing costs into different categories and compute the unit cost. Indicate the missing amount of different cost items, and prepare a condensed cost of goods manufactured schedule, an income statement, and a partial balance sheet. Prepare...
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...publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Library of Congress Cataloging-in-Publication Data Haber, Jeffry R., 1960– Accounting demystified / Jeffry R. Haber. p. cm. ISBN 0-8144-0790-0 1. Accounting. I. Title. HF5635.H112 2004 657—dc22 2003017265 2004 Jeffry R. Haber All rights reserved. Printed in the United States of America. This publication may not be reproduced, stored in a retrieval system, or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019. Printing number 10 9 8 7 6 5 4 3 2 1 Contents Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 1 Chapter 2 Introduction . . . . . . . . . . . . . . . . . . Financial Statements . . . . Income Statement . . . . . . . . Statement of Retained Earnings Balance...
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...evaluation * Incremental analysis * Budgeting * Capital allocation * Earnings per share * Ratio analysis * Basic Functions of an Accounting System * Interpret and record business transactions * Classify similar transactions into useful reports. * Summarize and communicate information to decision makers. * Objectives of Financial Reporting (general to specific) * Information useful in making investment and credit decisions * Information useful in assessing amount, timing and uncertainty of future cash flows. * Information about economic resources, claims to resources, and changes in resources and claims. * The primary financial statements * Balance Sheet * Income Statement * Statement of Cash Flow * Characteristics of Externally Reported Information * A Means to an End * Broader than Financial Statements * Historical in Nature * Results from Inexact and Approximate Measures * Based on General Purpose Assumption * Usefulness Enhanced via Explanation *...
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...managers can monitor cash flows, identify upcoming and changing trends as well as monitor a company’s financial performance in order to anticipate any changes that will affect a company’s profitability and the shareholder’s equity. Within the confines of this paper Team A will compare, contrast, and compute the financial statement analysis of three companies, which are Toyota, Southwest Airlines, and J C Penney. Team A will analyze each company’s financial statement by utilizing liquidity ratios, efficiency ratios, leverage ratios, and profitability ratios. We will also discuss the differences of the income statement in regards to the specific industries of the companies that we have chosen as well as the differences in accounting practices of the International Financial Reporting Standards (IFRS), the Financial Accounting Standard Board (FASB) and the Generally Accepted Accounting Principles (GAAP). Industry Differences Although most income statements are essentially the same, the income statement of a company in the retail or manufacturing industry may differ from the income statement of a company in the service industry. Retail and manufacturing income statements provide a listing of goods sold. This itemization allows for tracking of inventory levels, data trends, tangible goods, and customer satisfaction by the number of goods sold. The listing...
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...internally consistent production plan can be devised. The budgeted numbers are then used to record certain transactions. Differences between budgeted and actual performance then appear in the accounting records, and can be analyzed so as to evaluate the performance of the firm. The budgeting process interacts with the operations research process in two ways. First, the budget process facilitates the transfer of both accounting and non-accounting information to those involved in operations. This information provides a basis for the formulation of the firm's production plan. Second, the budget reflects the production plan, and becomes a benchmark for subsequent performance evaluation. An analysis of deviations from the budget provides additional information that can be used when formulating the next period's production plan. The Planning Stage Feldman Toy Company makes two types of toys, regular and deluxe. Each toy requires the use of machine time in the production process. To illustrate the way the budget process works, consider the machinery department in Feldman. First, the department develops a flexible budget. A flexible budget for the machinery department is a prediction of that department's expenses during the accounting period as a function of its level of activity. By analyzing prior results, the department forecasts the relationship between its costs and activity level. For...
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...This system of exchange was prevailing before the invention of money. Money: In order to overcome the limitations of barter system the “money” was invented. Money is a medium of exchange. In ancient times a piece of leather served as money. Later, gold coins, copper coins, iron coins with the stamp of the King etc., were used as money. In the modern times, paper money is used. For example, Rupees, dollars etc., in the form of printed paper act as money. Now A to A can sell wheat to some body and get money and with this money or a part of it, he can buy goat. A to A need not go in search of a person who can exchange goat for wheat. Definitions: Business: An entity which carries on trading /manufacturing and selling of goods and services for a profit is called ‘business’. The main intention of a business is to make profit, while trading...
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