...Financial Statements In accounting there are four basic financial statements that are considered standard practice by the generally accepted accounting principles (GAAP). These are the income statement, the retained earnings statement, the balance sheet and the statement of cash flows. While each of these reports is very important in its own regard, they are also intermingled and depend on each other to represent a complete unbiased view of an organizations financial situation. The income statement reports revenues and expenditures for the given period of time. This report is important because it will show net income or net loss for a given period of time. However, not all monies received are considered revenue and not all monies put out are considered expenditures. For example money received from selling or issuing stocks are not considered revenue. The same holds true for dividends, they are not considered expenditures. This period of time can vary from organization to organization. Most reports are shown on a quarterly and annual basis. When the income statement is properly prepared will produce the company's net income. This amount is then transferred to the retained earnings statement. The retained earnings statement shows the income that is retained by the organization. This report not only shows changes but also the reason for said changes. This allows all interested parties to see and understand if there is a significant variation from the previous report. This...
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...prior to doing so is the financial statement of the company. For small business as well as large firms, Investors and Creditors use a company’s financial statement to understand and analyze the financial condition of the firm and to see how well the firm is performing. Per Way, J. (n.d.), managers give great importance to the financial statements since publishing financial statements can provide management or senior leadership with tools to be able to communicate regarding the company’s accomplishments with interested outside parties. There are many ways to evaluate a firm’s performance, but the best way to do so, is by looking at actual numbers of profits and loss which is clearly reflected in the financial statement of the firm. Thus, a financial statement should be used an optimal tool to evaluate a firm’s financial standing before buying or investing in it. A firm’s financial statement consists of many different components. There are various ways a firm can evaluate their financial accomplishments. One such way is via an Income Statement. A typical income statement would consist of a firm’s expenses and sales revenues over certain period of time. This time could range from a month or quarter, semi-annually or annually. If someone wants to evaluate the bottom line income of a firm to understand how well the firm is doing, it is a two-step process. First, the firm’s operating income needs to be calculated by removing expenses from the income statement. After that,...
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...IFRS and GAAP Convergence Mercy Hudson Strayer University I have read and understand Strayer University’s Academic Integrity Policy. I promise to conduct myself with integrity in the submission of all academic work to the University and will not give or receive unauthorized assistance for the completion of assignments, research papers, examinations or other work. I understand that violations of the Academic Integrity Policy will lead to disciplinary action against me, up to and including suspension or expulsion from the University. I understand that all students play a role in preserving the academic integrity of the University and have an obligation to report violations of the Academic Integrity Policy committed by other students. Chevron Corporation, an American multinational energy corporation is active in more than 180 countries. Chevron is one of the world’s six ‘super major’ oil companies. For the past five years, Chevron has been continuously ranked as one of America’s five largest corporations. Chevron’s headquarters is in San Ramon, California (Fox, 2012). It is engaged in every aspect of the oil, gas, and geothermal energy industries, including exploration and production; refining, marketing and transport; chemicals manufacturing and sales; and power generation. Chevron was originally known as Pacific Coast Oil Company in 1979, where they made their oil discovery in Pico Canyon north of Los Angeles, California (2012)....
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...Partners (Seller) is a sophisticated private equity firm that specializes in communications and media companies and is the owner of F&W. ABRY Partners (Buyer) is a sophisticated media-focused private equity firm that currently owns several media companies throughout the United States. In the ABRY Partners case, Buyer attempted to rescind, several months after the closing, its $500 million purchase of F&W from Seller. Shortly following the transaction’s closing, Buyer began to identify a number of serious financial and operational problems that let Buyer to conclude that it had been defrauded by the Seller and F&W. Buyer alleged that Seller and F&W’s management manipulated F&W’s financial statements in order to fraudulently induce Buyer to purchase F&W’s at an excessive price. Buyer claimed that because of these manipulations, F&W’s historical financial statements contained material misrepresentations and did not accurately depict F&W’s financial condition, which constituted a breach of F&W’s representations and warranties. Finally, Buyer alleged that the failure to implement technological systems and the lack of notification of these problems in an officers...
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...A financial statement (or financial report) is a formal record of the financial activities of a business, person, or other entity . Relevant financial information is presented in a structured manner and in a form easy to understand. They typically include basic financial statements. • Income Statement: reports the results of operations for a specific period of time. • Retained Earnings Statement: reports the changes in retained earnings for a specific period of time • Balance Sheet: reports the company's financial position at a specific date. • Statement of Cash Flows: reports the case receipts and payments for a specific period of time. The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position. Financial statements are intended to be understandable by readers who have a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently The users of financial statements use financial statements for a large variety of business purposes and their ability to understand and analyze financial statements helps them to succeed in the business world....
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...To: FASB / IASB From: Billy Leigh Re: Proposed Changes to Financial Statement Presentation Dear Members of IASB / FASB, As I understand it, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) are proposing a joint venture to change the presentation of financial statements. I appreciate the opportunity to comment on the proposed changes. It is in my humble opinion that the current requirements for financial statement presentation allow for too many alternative ways to present the same events or activities. In addition, the information presented is often too aggregated for financial statement users to gain any real insight into a company’s financial position. Because users of financial statements interpret valuable information from these documents, it is of the utmost importance that both the FASB and IASB ensure that this information is as consistent and detailed as possible. This increase in detail and consistency will better allow users of financial statements to fully understand the relationship between an entity’s financial statements and financial results. (1) It should be expected that changes to an established system would be met with some dismay from both preparers and users of financial statements. The increased time and cost it will take to prepare financial statements, as well as peoples’ reluctance to accept change will make this transition difficult. However, once these changes have gained a...
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...determine a security’s value by focusing on underlying factors that affect a company's actual business and its future prospects. On a broader scope, you can perform fundamental analysis on industries or the economy as a whole. The term simply refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements Fundamental analysis serves to answer questions, such as: • Is the company’s revenue growing? • Is it actually making a profit? • Is it in a strong-enough position to beat out its competitors in the future? • Is it able to repay its debts? • Is management trying to "cook the books"? The term fundamental analysis is used most often in the context of stocks, but we can perform fundamental analysis on any security, from a bond to a derivative. As long as we look at the economic fundamentals, we are doing fundamental analysis. For the purpose of this tutorial, fundamental analysis always is referred to in the context of stocks. Intrinsic Value of Fundamental Analysis: Intrinsic value is one of the primary assumptions of fundamental analysis is that the price on the stock market does not fully reflect a stock’s “real” value. In financial jargon, this true value is known as the intrinsic value. For example, let’s say that a company’s stock was trading at $20. After doing extensive homework on the company, we determine that it really is worth $25. In other words, we determine the intrinsic value of the firm...
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...ca | Calendar Description This course, in conjunction with AP/ADMS 3595 3.00, develops thorough knowledge and understanding of generally accepted accounting principles and financial statement analytical skills by examining various technical areas of financial accounting. Prerequisite: AP/ADMS 2500 3.00. Prior to Fall 2009 Prerequisite: AK/ADMS 2500 3.0. Course credit exclusion: AK/ADMS 3585 3.00. Learning Outcomes After completion of the course, apart from mastering the technical knowledge of the revenue and asset side of the financial statements, students should also 1. Understand the importance of ethics in the accounting profession and realize potential conflicts of interest that one may encounter in the profession. 2. Begin to learn how to see the inter-relationship between accounting issues, analyse them, and integrate the findings to draw reasonable conclusions. 3. Begin to learn the basics of case writing and communicate effectively. 4. Understand the importance of teamwork and learn how to develop work plans and resolve conflicts. The students in this course are expected to achieve the following learning objectives through the completion of various assignments required for the course: * Technical Competencies in Financial Reporting that include the role of financial reporting, the application of reporting frameworks, the reporting of routine and non-routine transactions in different circumstances, and an understanding...
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...What is financial accounting? Financial accounting is regarded as a professional in modern society. Most of the firms, especially the large ones, need it and have a particular department or team called accounting. In universities, financial accounting becomes a compulsory subject which BBA students must study. It is so well known that almost all people have heard of it. What actually is financial accounting? More specifically, what the main objectives or roles financial accounting has so that firms need it at a critical manner? Generally speaking, the purpose of accounting is to give relevant data or information that is necessary to make sound decision for the firms. And the main objective of financial accounting is to prepare financial statements such as statement of financial position, income statement, statement of owner’s equity and statement of cash flow. The preparation must be guided by generally accepted accounting principles, “GAAP” in short, of the physical location. The statements are then used to tell the external users the performance of the firm (Eisen, 2003). And the primary need for financial accounting, or sometimes called financial accountancy, is to minimize the principal-agent problems in organizations. This is to be done by evaluating and monitoring agents’ (manager) production and presenting the performance to people who interest in. In addition, financial accounting serves a lot of important objectives. It aims to understand the operation of the business...
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...ACCOUNTING IN CONTEXT POTTER I LIBBY I LIBBY I SHORT ACCOUNTING IN CONTEXT BRADLEY N. POTTER University of Melbourne ROBERT LIBBY Cornell University PATRICIA A. LIBBY Ithaca college DANIEL G. SHORT Texas Christian University Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. Louis Bangkok Bogotá Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto Copyright © 2009 McGraw Hill Australia Pty Limited Additional owners of copyright are acknowledged in page credits. Every effort has been made to trace and acknowledge copyrighted material. The authors and publishers tender their apologies should any infringement have occurred. Reproduction and communication for educational purposes The Australian Copyright Act 1968 (the Act) allows a maximum of one chapter or 10% of the pages of this work, whichever is the greater, to be reproduced and/or communicated by any educational institution for its educational purposes provided that the institution (or the body that administers it) has sent a Statutory Educational notice to Copyright Agency Limited (CAL) and been granted a licence. For details of statutory educational and other copyright licences contact: Copyright Agency Limited, Level 15, 233 Castlereagh Street, Sydney NSW 2000. Telephone: (02) 9394 7600. Website: www.copyright.com.au Reproduction and communication for other purposes Apart from any fair dealing for the...
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...How can the financial performance of privately owned business be monitored? What are the main ways of monitoring to ensure the sound financial performance of an organization? Make use of examples to illustrate your arguments and answers. Name: XIE Yang (Jasmine) Tutor’s name: Diane Marsh Date: 16/09/2013 Word count: 1403 Introduction A primary responsibility of any business is to understand the financial situation. With this understanding, the company can run accordingly with management. Shen Yuchu (2005) illustrates that it is significant for the privately-owned firms to understand whether profit status influences performance. “Financial performance is measured by the entity’s ability to generate profit after tax, the accumulated change in retained profits and the entity’s ability to generate positive operating cash flows. These metrics were selected as they are standard techniques employed in the private sector when evaluating the performance of firms” (Aulich. C & Hughes. M, 2013). Financial performance with different ownership may be overseen in different aspects, so privately owned companies should be monitored from a specific perspective. This paper will examine the sound measures to monitor the financial performance in privately owned business. Firstly, some financial measures will be introduced to monitor the performance from the privately-owned nonprofit entities, presenting by a health center in the USA. Next to this, Melbourne...
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...important to understand. Under this accounting practice, revenues are recorded into the financial records as soon as the services are performed or goods are delivered, no matter whether the payment is received from the clients or not. If you have “earned” it, you better record it. On the other hand, based on the matching principle, expenses are entered into the financial system to the extent; they are utilised in order to generate the recognised revenue as above. No matter whether the payment has been made or not, if you have “incurred” it, you need to book it. It is slightly complicated and requires time and money to implement it. However, it tells the real financial situation of the company and shows to the owners the overall profitability of its operation. Cash accounting method has a completely different viewpoint. It states that revenues to be recorded when cash is “received” from customers, no matter when the service is performed or goods delivered. On the other hand, expenses need to be booked when cash is actually “paid," no matter when it is incurred. This method is easy to understand and consumes fewer resources. It paints an accurate picture of the cash appetite of the company as it shows how much cash is left over after paying all the expenses. Do companies have a choice? Well, accrual accounting is considered a common accounting method employed by a majority of the companies. GAAP approves accrual accounting over cash accounting and requires financial statements...
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...Analyzing the Four Financial Statements N'Gia K. Conyers ACC 561 October 8th, 2012 Charles Royes Jr. Analyzing the Four Financial Statements In the study of accounting there are four different types of financial statements. These financial statements have an important role in the daily functions of many businesses and corporations. Accounting is defined as “the information system that identifies, records, and communicates the economic events of an organization to interested users” (John Wiley & Sons, 2012). The financial statements when working with finances include Balance Sheet, Income Statement, the statement of cash flows, and the statement of owner’s equity. This paper will explain the four financial statements, along with which statement is a best fit to creditors, investors, and management. The financial statement that would be of interest to creditors is the balance sheet. The balance sheet presents outlined information in relation to an organization’s assets, liabilities, and shareholder’s equity. The balance sheet statement also shows the financial position for a specific company at any given time. Under assets are two different sections, current asset, and fixed asset. The income statement provides the details that show the profits and losses over a period, such as one month, three months, and up to one year. The income statement is prepared at the end of the accounting period. In addition, the income statement identifies the amount of net income...
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...Financial Statement Analysis Introduction The authors of Learning Team B choose two health organizations to compute the quick and current liquidity ratios, the DuPont ratio, profit margin, asset utilization, and financial leverage. The health organizations chosen are Happy Hospital and Health Management Associates. Within these two organizations the learning team will be discussing how differences in the industries and different measurements conventions affect presentations, and if one of the companies uses the cash basis of accounting, how would that differ from the accrual basis. The team will also be discussing in what ways the elements of the financial statements interact with one another. How might changing one of the financial statements affect the other financial statements? Why is it essential to understand the relationship between the financial statements? In what ways do the elements of the financial statements interact with one another? The objectives of Financial Statement presentation are to show an interrelated financial depiction of an entity's activities, to disaggregate information so that it is useful in evaluating an entity's future cash flows, and to present information about liquidity and financial flexibility of said entity. An organized financial picture means items in financial statements are clear and that the financial statements of an entity complement one another regularly. Financial statement analysis aimed at objectives such as assessing...
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...Financial Statements Paper Angela Carson Acc/280 Principles of Accounting Stephen Willden October 4, 2010 The purpose of accounting is to help users of financial information to understand how a company or individual is functioning in the economy. Accounting takes the financial information of an organization and it identifies records and communicates its economics to the interested parties. There are four basic financial statements. The income statement shows the revenues, expenses and income of a company over a specific period of time. The retained earnings statement summarizes the changes in earnings over a specific period of time. The balance sheet shows a report of assets, liabilities and equity for an exact point in time. The last would be the statement of cash flows which summarizes cash flows in and out of a company over a specific amount of time. The four basic financial statements are interrelated with one another. They should be prepared in a specific sequence. Net income, which is the income statement, is completed first. The net income is needed to help determine the ending balance in retained earnings. The retained earnings statement provides information if there was an increase or decrease during the specific period of time. The end balance from the retained earnings statement is used to prepare the balance sheet. This is where the basic accounting equation, Assets equal Liabilities plus Equity, is used to calculate the balance sheet. The balance sheet gives...
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