RSM100Y1 Lecture Notes - Lecture 2: Accounting Equation, Mci Inc., Accrual
14 Mar 2016
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Learning objectives: review the accounting equation, describe basic principles of financial accounting, understand why companies cook the books", analysis of apple"s financial statements. The value of what we own = the money invested in the business (other people"s $ + our $) Assets or services should initially be recorded at their actual cost. Revenue should be recorded when it has been earned. Expenses should be matched with revenue - i. e. recognized in the same period that related revenue is recorded. Causes for differences between net income and cash flow. Non-cash items related to accrual basis of accounting. Sales made where cash payments have not been received. Payments made for prepaid expenses that haven"t been incurred . Inadequate reserves for bad debts, returns & liabilities. Changing inventory valuation methods - 1 time boost to income. Read management"s discussion of changes in operations. Review the firm"s consolidated balance sheet (its assets, liabilities, and owners" equity)
