09 19 Lecture Notes - Financial Statement.docx

3 Pages
74 Views

Department
Business Administration
Course Code
Business Administration 2257
Professor
Baldwin Wallace

This preview shows page 1. Sign up to view the full 3 pages of the document.
Description
th September 19 rd Quiz 2 – covers Chapter 3 – Due October 3 ACP #1 – Due September 26 th - Posted on WebCT - Handwritten and stapled - Include name, student # and seminar section (Thursday @ 4) - Drop at front of room before lecture. What is accounting? Quantitative information (measured using a single unit) about an entity that is communicated to others. Textbook definition: The process of identifying, measuring and communication economic information to various users. Objectives of Financial Reporting Overall objective – provide information for decision making - Who are decision makers? - What kind of decisions do they want to make? - When do they want to make these decisions? Users of Accounting Information Internal – Management, Employees, Human Resources External – [Current and potential owners current owners want to make sure their company will continue to be successful and potential want to make sure the company will be around for years], [banks, creditors, suppliers, want to make sure you are financially sound and will be able to sell product and make payments] financial analysts, government agencies, trade organizations, [customers/users for example, if Blackberry is having problems a customer may be less likely to buy a Blackberry because they may not be able to use it in a few years], [donors want to make sure their money is going where the company says it will] Decisions Made with Financial Information Operating activities [decisions made by manager type] – add new product line or service, build a new plant, start new business, cancel service, close divisions Investing activities – Investing, donate, sell shares or bonds, extend credit, loan Financing activities – Borrow, loan Qualitative Characteristics While the focus of accounting is on counting and measurement, there are certain qualitative characteristics that are important: Relevance – something may not be relevant to one decision, but it is to another Reliability - Verifiability – can someone else get the same numbers easily? - Representational faithfulness Comparability and consistency - using the same accounting policies year after year (first note in the statement) Understandability – the presumption that the person reading the financial statement has a basic knowledge of business or accounting (that you understand what “accounts payable” etc. are) Materiality – sort of quantitative, but also a judgement… A threshold – “the amount above which it would have a significant impact or effect on your decision” Losing $30 may impact what you want to do today – what/if you eat. A company like RIM (Blackberry) losing $30 has no real impact. The impact the error has on the company – if it’s below the threshold, they don’t make adjustments (they may add them all together though and if that’s above, they may ask for an adjustment) Cost/benefit E2-1, p 75 Some assumptions made about the Financial Statements Economic entity – what the statement is for (personal information should not be included) Time period – at least annual – public companies are quarterly (may have large loans, but also for their own internal needs Going concern – assuming the company will never die Cost principle – everything is recorded at cost (what we paid for it) Monetary unit – usually the dollar Classified Balance Sheet Also known as the Statement of Financial Position Summarizes the as
More Less
Unlock Document

Only page 1 are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit