Flow of information in an accounting system
Journal entries (25): Record any transaction showing which accounts are changed and by what amount General journal (26) Listing of all journal entries General ledger …
FRA
Relationship between BS, IS, CF
Balance sheet Financial position at the end of the current accounting period Income statement, cash flow statement, statement of owner’s equity Change that occurred during …
Need for accruals and valuation adjustments
Accrual accounting (19) Revenues and expense are recorded when it occurs Types of accruals: Unearned revenue (20): receive cash before providing good or service Cash …
Process of recording business transactions
One transaction – 2 accounts Double-entry accounting (18) A transaction has to be recorded in at least two accounts Exp: increase in asset account must …
Accounting equation
Basic accounting equation (16) Assets = liabilities + owner’s equity Expanded accounting equation (17) Assets = liabilities + contributed capital + ending retained earnings = …
Classifying account into financial statement element
5 classes: Asset Liability Equity Revenue Expense Assets: company’s economic resource Cash and cash equivalent Accounts receivable: have “allowance for bad debt” as contra accounts …
Relationship between FS elements and accounts
Accounts are elements of financial statement Financial statement elements (4) Major classification Assets Liabilities Owner’s equity Revenue Expense Account (5) Account is record within each …
Classifying business activity for financial reporting purposes
Business activities are classified as: Operating activities (1) Ordinary course of business (producing, selling goods) short-term Investing activities (2) Buying or selling long-term asset such …
Steps in financial statement analysis framework
Financial statement analysis framework consists of 6 steps: 1: State the objectives and context Question to seek answer Resource and time available to perform the …
Information source for financial statement
Quarterly and semiannual reports Report events such as acquisition, disposals of major assets Update the major financial statement and footnotes but not necessarily audited SEC …