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Illustrate and explain a balance sheet. Discuss the uses and limitations of this financial statement. Introduce the accounting equation and illustrate the effects of business transactions upon this equation and upon a balance sheet.
Introduce the income statement, emphasizing the nature of revenues and expenses. Introduce the statement of cash flows and distinguish among operating, investing, and financing activities.
Explain and illustrate the concept of financial statement articulation. Chapter 02—Basic Financial Statements 7. Explain the importance of adequate disclosure. Our overriding objective in this chapter is to introduce students to the balance sheet, income statement, and statement of cash flows.
We find Problem 2. Exercise 1 defining assets and liabilities, stimulates student interest when discussed in class. Also, it is short enough that they can be discussed without having been assigned as homework. We also recommend Problem 9 or 10 for initiating a lively classroom discussion of many of the concepts introduced in this chapter. In covering Chapter 2, we like to continue the overview of the financial reporting process begun in Chapter 1.
Case 2. Students gain a better understanding of how external users such as investors and creditors may use the information contained in the general purpose financial statements to make better business decisions.
Have you considered using annual reports? We encourage students to review these reports throughout the course and to note any similarities and variations between their reports and the textbook treatment of various topics.
These comparisons increase students' interest in the course, prompt interesting questions, and demonstrate the diversity, which exists in practice. We also urge instructors to spend some class time examining how various accounting transactions impact the accounting equation.
In the textbook, we walk through the transactions of Overnight Auto Service. Subsequent to each transaction, we examine the changes that occurred within the accounting equation. This understanding better prepares students to learn the rules of double-entry bookkeeping, which are introduced in Chapter 3. Instructors may want to present the balance sheet on January 20, alongside the balance sheet on January 31, This enables students to see the culmination of all of the recorded transactions.
Students can also compare the financial position and liquidity of the company between the two reports. Students learn to retrieve the quarterly report 10Q from the website.
This is a good opportunity for instructors to assist students in navigating the SEC website. When students initially visit the SEC website, they may feel a bit overwhelmed.
At this point, students have the option of searching by company name or ticker symbol if they have that available. After retrieving the filings, they have options to view the documents as well as the Interactive Data. We find this to be a valuable teaching moment in introducing students to those basic financial research skills. Chapter 02—Basic Financial Statements This chapter briefly introduces the stable dollar assumption.
Students can become familiar with the impact of inflation on monetary valuations using the Inflation Calculator at the Westegg website. This site provides a calculator that allows a monetary amount in one year to be converted into an equivalent amount in a second year.
Indicate your answer to each of the following questions in the space provided. Complete the following balance sheet for Manhattan Family Dentistry on January 4 of the current year. Notes payable Accounts payable Total liabilities Total assets Accounts receivable Appraised value of property ignored. Explain the nature and general purpose of financial statements. No reproduction or distribution without the prior written consent of McGraw-Hill Educat Introduction to Financial Statements Investors and creditors are interested in the cash flows that they expect to receive in the future.
Creditors are interested in the ability of an enterprise, to which they have made loans or sold merchandise on credit, to meet its payment obligations, which may include payment of interest.
Investors are interested in the market value of their stock holdings, as well as dividends that the enterprise will pay to them while they own the stock. Financial Statements A financial statement is simply a declaration of what is believed to be true about an enterprise, communicated in terms of a monetary unit, such as the dollar.
When accountants prepare financial statements, they are describing in financial terms certain attributes of the enterprise that they believe fairly represent its financial activities. Three Primary Financial Statements Statement of financial position often referred to as the balance sheet Income statement Statement of cash flows KEY POINT While examining the financial statements in this chapter, we will be assuming the corporate form of business ownership.
Financial Statements: Balance Sheet 1. Statement of Financial Position Balance Sheet a. Describes where the enterprise stands at a specific date. A snapshot of the business in financial or dollar terms that shows what the enterprise looks like at a specific date. Financial Statements: Income Statement 2.
Income Statement a. An activity statement that shows the revenues and expenses for a designated period of time. Revenues have resulted or are expected to result in positive cash flows through transactions with customers. Expenses result in negative cash flows outflows of cash through business activities. Financial Statements: Statement of Cash Flows 3.
Statement of Cash Flows a. Enables the financial statement user to better understand the change in the cash balance shown on the comparative balance sheet. You may not post or redistribute, electronically or otherwise, any solution material.
Violation of this policy constitutes a copyright violation. Alternative problems, with solutions, may be found at our partner website Bookboon. The time estimates. Preparation of a balance sheet for a circus—an entity with an unusual variety. File Name: financial and managerial accounting 17th edition pdf. McGraw Hill Education. Refrigeration and air conditioning notes pdf. Harry potter and the deathly hallows book download pdf.
Harry potter and the goblet of fire book free download. Family and friends 1 class book pdf free download. Angels and demons download book. Yes and yes publications dsc books pdf free download. Scroll for more. Chapter Summary Financial statements are the primary means of communicating financial information to users. Chapter 2 covers the income statement, balance sheet, and statement of cash flows.
Chapter 1 set forth the objectives of the financial reporting process, and offered the observation that these objectives are met in large part by a set of financial statements. In this chapter, we take up the task of introducing the balance sheet, income statement, and the statement of cash flows.
The presentation is organized around the accounting equation. The equation serves as the basis for elementary transaction analysis. A continuing illustration examines the impact of a number of simple transactions upon the balance sheet of a simple service business.
Revenue and expense transactions have been included so that we might introduce the income statement and statement of cash flows at an elementary level. This in turn has provided the opportunity to discuss and illustrate statement articulation. Before closing, the chapter emphasizes the importance of adequate disclosure regarding both financial and nonfinancial information, thereby reinforcing the Chapter 1 theme that the financial reporting process is broader than the financial statements.
The chapter also covers accounting principles dealing with asset valuation, as well as an introduction to forms of business organization. Learning Objectives 1. Explain the nature and general purpose of financial statements.
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