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Analysis of financial statement
Analysis of financial statement
Elements of cash flow statement
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Accounting - It is the process of identifying, recording and summarizing economic data about the organization and reporting it to decision makers.
Financial Accounting - It serves external decision makers such as Stockholders, suppliers, banks, and government agencies
Management Accounting – It serves internal decision makers, such as top executives, department heads, college deans, and other people at management levels within the organization.
Questions on Financial situation about the company:
A) What is the financial picture of the organization on a given day?
B) How well did the company do during a given time period.
Three statements that are very important for decision makers that are prepared by accountant are:
a) Balance Sheet
b) Income Statement
c) Statement of Cash Flows.
Annual Report – A report prepared by corporate management to be distributed among current investors and future prospects. It contains overview of company along with future goals. It also contains all the information about financial situation of the company.
Form 10K – A document submitted with SEC that contains the financial statements of the corporation.
Balance Sheet = Statement of Financial Position = Financial Situation of a company at a particular instant in time. Balance sheet MUST balance both sides (Assets and Liabilities + Owner Equity). If the balance sheet doesn’t match on both sides, there is a mistake.
Balance Sheet Equation
Assets = Liabilities + Owner’s Equity
Owner’s Equity (OE) = Assets – Liabilities
Another Version-
Assets = Liabilities + Owner’s Equity
Assets = Liabilities + Paid in Capital + Retained Earnings
Assets = Liabilities + Paid in Capital + Revenues (Total Sales) – Expenses (Total Sacrifices)
Assets - Economic Resources that either help future Cash Inflow (Adding) or help reduce outflow of CASH
Liabilities - Economic Obligations to outsiders or claims against its assets by outsiders.
Paying Dividends is not an Expense since paying dividends it the distribution of wealth to its owners.
Owner’s Equity - Owner’s CLAIM on organization’s assets or total assets less total liabilities. Remember ( OE is the owner’s claim that can be made after deducting all the liabilities from the Company’s Assets.
Notes Payable - Promissory note(s) that are evidence of a debt and state the terms of repayment.
Entity - an organization or part of the organization that stands apart from other organizations and individuals as a separate unit.
Transaction - an economic event that that affects the financial situation of the entity an can be recorded reliably by the accountant.
Long-lived Asset – an asset that the company expects to provide service for more than 1 year.
Management accounting in organisation is very important for decision-making and to make the business more efficient and therefore increasing its profits. Is the process of preparing accounts that can help managers to make day-to-day and short-term decisions, by providing them with accurate and timely key financial and statistical information...
Financial statement users around the globe use financial statements to evaluate the performance of companies (Fundamentals of Financial Accounting, 2006). In order to locate a company’s reported assets, liabilities, expenses and revenues, statement users rely on four types of financial statements. The four financial statements include: Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows (Fundamentals of Financial Accounting, 2006, p. 6). Each of these reports provides different information to the financial statement user. The Balance Sheet reports at a point in time: a company’s assets (what it owns), liabilities (what it owes) and stockholder’s equity (what is left over for the owners) (Fundamentals of Financial Accounting, 2006, p.7). The Income Statement shows whether a business made a profit (net income) during a specific period of time (Fundamentals of Financial Accounting, 2006, p. 10). The Statement of Retained Earnings illustrates what portions of the company’s earnings was paid to stockholders and retained by the company for future operations (Fundamentals of Financial Accounting, 2006, p.12). Finally, the Statement of Cash Flows reports summarizes how a business’ “operating, investing, and financial activities caused its cash balance to change over a particular range of time” (Fundamentals of Financial Accounting, 2006, p.13).
The Assets consists of: Current assets are highly liquid (cash, receivables, and inventories), Fixed assets can be capital-intensive assets which are permanent, and other assets can be intangible (patents, copyrights, and goodwill).
This case assignment will discuss managerial accounting and different income statements a business owner may use internal to the company. Divided into two parts, part one will discuss and analyze the difference between managerial and financial accounting, the needs for financial information used for internal purposes. Additionally, it will focus on the managerial accounting profession and how its roles have changed in today’s business. Expanding on the profession, it will comment on the Certified Management Accountant (CMA) certification and how it differs from the CPA certification. Part two of this assignment
“The objective of financial statements is to provide information about the financial strength, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.”
Financial Accounting is ‘Asset valuation, accounting record completeness and accuracy, accounting estimates, reporting transparency, fair value accounting issues, convergence of accounting standards, evolution of accounting standards, audit efficiency and effectiveness’, as suggested by Accounting Dictionary (2014).
On the other hand, managerial accounting is category of accounting that provides special purpose statements, and it reports to management and other persons inside the
Accounting is basically a service activity. Its purpose is to provide quantitative information that principally used by the managers, investors, tax authorities, and other decision makers to make the financial decisions within companies, organizations, and public agencies. Accounting is also widely known as the “language of business.” An accountant measures, communicates, and interprets financial activities. They prepare financial statements or reports for individuals, businesses, government agencies, or other non-profit organizations. They use the accounting systems to categorize the expenses and income to the typical groups. They also keep tract of the money received or paid out to see if the transactions are accurate and complete. Accountants are familiar with the computer operation. They use the computer...
Accounting involves recording, classifying, summarizing, and interpreting financial information. Financial information is presented in reports called financial statements. Accountants need to collect information about business transactions and record them in order to be able
Meanwhile, on the other hand, financial statement is also important for every business for a
In accounting terms, any tangible (physical resources) or intangible (nonphysical resources) that can be possessed or controlled to create positive monetary value is known as Asset. In other words, anything that can be transformed into cash value is termed as asset. This includes:
Writing an essay on this topic brings an attention on how accounting helps manager in taking effective business decision. It is very important for any organization to take good business decision as to grow business by minimal cost. So, In order to make good decision People and organization need useful information. There is where Accounting plays a ey role. Accounting provides management with data needed to determine whether a business is at a loss or a profit, how much debtors owe, how much a business owes others, and other financial information. Accounting measures business transactions and such can helps managers in the right direction with solid information. Basically accounting is a tool for management to employ to help make sound business decisions on a timely and effectively manner.
Accounting aids the government and organisations in decision making for their financial stability. This numerical data helps solve real life problems and contributes to how the economy and businesses perform.
An accountant makes sure that the Nation’s firms are run efficiently, the public records are kept accurately, and that taxes are paid properly and on time (“Accountants and Auditors”). Accounting is the study of how a business tracks their income, assets, expenses, and many other things for a period of time. They also do many other things like quality management, tax strategy, and health care benefits management (“Welcome to Careers in Accounting”). An accountant is crucial to the success of a business, without one the business tends to fail.
Accounting is a very important term to our modern society. It is the career for men and women who at the start have their eyes set on top positions in industry, management, government, and general business. Accounting is a basic need of every businessman, from the operator of a filling station to the government of the United States. It's so important to our society. None of the business organization can operate without is. They are there-somewhere-in every business. In small business, people use pen, ink and skill keep the records. In large business, modern accounting machines are used to operate. Men and women are directing these machines in the accounting process. Wise businessmen enter business must have some accounting knowledge.