Tải bản đầy đủ

Understanding business 8th by mcchugh nickels chapter 17

*
*
*

Understanding
Financial
Information
and
Accounting

*
CHAPTER

**

17

Nickels

*


McHugh

McGraw-Hill/Irwin
Understanding Business, 8e

*

McHugh
1-1

17-1

© 2008 The McGraw-Hill Companies, Inc., All Rights


*
*
*

Importance of
Accounting Information

• Definition-

Accounting
• Audiences

• Managers
• Government
• Investors, Suppliers
& Creditors

17-2


*
*
*

The Accounting System



17-3


*
*
*

The Influence of
Accounting Information
• Managers- Financial reports pinpoint
problems/opportunities
• Government- assists with tax collection
• Investors, Suppliers, & Creditors- provides a
means to analyze business

17-4


*
*
*

Areas of Accounting

• Managerial

Accounting

• Inside


Organization
C.M.A.

• Tax Accounting
• Government &
Not-for-profit
Accounting

• Financial

Accounting

• Annual Report
• Private



Accountant
Public
Accountant
C.P.A.

• Auditing
17-5


*
*
*

Top Business
Uses of Accountants

17-6


*
*
*

How to Read a
Corporate Annual Report


Read management’s discussion of changes
in operations. Try to identify strengths or
weaknesses.



Review the firm’s consolidated balance sheet.
(Its assets, liabilities, and owners’ equity.)



Analyze the Income Statement. Look beyond
the year. (Sales drops can spell trouble.)



Review the statement of changes in cash
flows.



Review auditor’s opinion.
17-7


*
*
*

Types of Accountants
Public

• Auditing
• Tax Consulting
& Compliance

• Management
Consulting

Private

• Management
Accounting

• Government
Accounting

• Academia
17-8


*
*
*

“Cooking the Books”

• Early Recognition of Revenue
• Late Recognition of Expense
• Inadequate Reserves for Bad



Debts, Returns, & Liabilities
Changing Inventory Valuation
Methods- 1 Time Boost to Income
Phony Transactions With
Partnerships

Courtesy of B. Lilly- De Anza College

17-9


*
*
*

5 Tips To Be Ahead of
Sneaky Accountant Tricks

1. Who’s who
2. Pick out the bad apples
3. Don’t fall for rapid refund
4. Know their loyalty
5. Watch what you sign
Source: CNNMoney.com, March 17, 2006

17-10


*
*
*

5 Ways to Avoid
More Enrons

1. Bring hidden liabilities back onto the

balance sheet
2. Highlight the things that matter
3. List the risks and assumptions built
into the numbers
4. Standardize operating income
5. Provide aid in figuring free-cash flow
Source: Business Week, February 18, 2002

17-11


*
*
*

Sarbanes-Oxley Timeline
Effective

Requirements

July 30, 2002

Prohibit personal loans to officers/directors.
CEOs/CFOs return incentive-based
compensation after erroneous financial report.

August 29, 2002

CEOs/CFOs must certify annual/quarterly
reports. Officers must make certifications
regarding company’s internal controls.

January 26, 2003

Responsibilities for attorneys/audit firms
increased. Disclosure requirements for offbalance sheets transactions tightened.

April 26, 2003

Audit committees must: be independent
directors, be responsible for compensation &
oversight of certifying accountants.

17-12


*
*
*

Not-for-Profits’ Policies
Due to Sarbanes-Oxley

Source: USA Today

17-13


*
*
*

How can Sarbanes-Oxley
be Improved?

Source: USA Today

17-14


*
*
*

Steps to Control
Accounting Practices

Source: USA Today, “Snapshots”, Section B, pg. 1, March 26, 2003

17-15


*
*
*

Bookkeeping vs. Accounting
Bookkeeping

Accounting

• Start of Accounting
• Record/Journalize

• Analyze
• Recommend

17-16


*
*
*

Steps In The
Accounting Cycle
Analyze Source
Documents

Take a
Trial Balance

Record
Transactions
in Journals

Prepare
Financial
Statements

Post Journal
Entries to Ledger

Analyze
Financial
Statements
17-17


*
*
*

Computers & Accounting

• Tool Not Decision Maker
• Simplification
• Accounting Packages
• Up-To-the-Minute Information
• Less Monotony
17-18


*
*
*

Financial Statements

• Balance Sheet- Statement of Financial
Position

• Income Statement- Statement of
Revenues & Expenses

• Statement of Cash Flows – Statement
of Cash Receipts & Disbursements

17-19


*
*
*

Accounting Equation
Assets

= Liabilities + Owner’s
Equity

Owne = Owed + Owner’s
d
Claims
Very Vegetarian Company

$826,00 = $613,00 + $213,00
0
0
0
17-20


*
*
*

Very Vegetarian’s
Balance Sheet (Assets)
Period ending 12/31/07
Assets
Current Assets
Cash $ 15,000
Accounts Receivable 200,000
Notes Receivable
50,000
Inventory
335,000
Total Current Assets $600,000
Fixed Assets
Land $ 40,000
Buildings (net)
110,000
Equipment & Vehicles (net)
Furniture & Fixtures (net)
Total Fixed Assets
$206,000
Intangible Assets
Goodwill
$ 20,000
Total Intangible Assets
$

Total Assets

40,000
16,000

20,000

$826,000

17-21


*
*
*

Very Vegetarian’s Balance
Sheet
(Liabilities & Owner’s Equity)
Period ending 12/31/07

Liabilities & Owners’ Equity
Current Liabilities
Accounts Payable
Notes Payable
Accrued Taxes & Salaries
Total Current Liabilities
Long-term Liabilities
Notes Payable
Bonds Payable
Total Long-term Liabilities
Total Liabilities
Owners’ Equity
Common Stock (1M shares)
Retained Earnings
Total Owners’ Equity
Total Liabilities & Owners’ Equity

$ 40,000
8,000
240,000

$288,000

$ 35,000
290,000
$325,000
$613,000
$100,000
113,000

$213,000
$826,000

17-22


*
*
*

Very Vegetarian
Income Statement
Period Ending 12/31/07
Revenue
Net Sales
$ 700,000
Cost of Goods Sold
Beginning Inventory
$ 200,000
Net Purchases
$ 440,000
Cost of Goods
$ 640,000
Less: Ending Inventory - $ 230,000
Less: Cost of Goods Sold
- $ 410,000
Gross Profit (Gross Margin)
$ 290,000
17-23


*
*
*

Very Vegetarian’s
Income Statement (cont’d)
Gross Profit
Operating Expenses
Selling Expenses
Salaries
Advertising & Supplies
Total Selling Expenses
General Expenses
Office Salaries
Depreciation
Insurance
Rent
Utilities
Miscellaneous
Total General Expenses
Less: Total Operating Expenses
Net Income (Profit) Before Taxes
Less: Income Tax Expenses
Net Income (Profit) After Taxes

$290,000
$ 90,000
$ 20,000
$ 110,000
$ 67,000
$ 1,500
$ 1,500
$ 28,000
$ 12,000
$ 2,000
$ 112,000

- $ 222,000
$ 68,000
- $ 19,000
$ 49,000

17-24


*
*
*

Very Vegetarian’s
Statement of Cash Flow
Net Cash Flow from Operations $ 52,000
Net Cash Flows from Investments
( 6,000)
Net Cash Flow from Financing
(19,000)
Net Change in Cash & Equivalents $
27,000
Beginning Cash Balance
( 2,000)
Ending Cash Balance
$ 25,000
=========
17-25


Tài liệu bạn tìm kiếm đã sẵn sàng tải về

Tải bản đầy đủ ngay

×