Friday, June 3, 2016

Accounting - Financial accounting An introduction to concepts, methods and uses - Solutions for text book questions with case studies and answers to problems. - Stickney

Chapter - 1

CHAPTER  1
INTRODUCTION TO BUSINESS ACTIVITIES AND
OVERVIEW OF FINANCIAL STATEMENTS
AND THE REPORTING PROCESS
Questions, Exercises, and Problems:  Answers and Solutions
1.1           The first question at the end of each chapter asks the student to review the important terms and concepts discussed in the chapter.  Students may wish to consult the glossary at the end of the book in addition to the definitions and discussions in the chapter.
1.2           Setting Goals and Strategies:  Although a charitable organization must obtain sufficient resources to fund its operations, it would not pursue profits or wealth increases as goals.  A charitable organization would direct its efforts toward providing services to its constituencies.
                 Financing:  A charitable organization may obtain some or all of its financing from donations (contributions).  A charitable organization does not issue common stock or other forms of shareholders’ equity, nor does it have retained earnings.
                 Investing: Similar to business firms, charitable organizations acquire productive capacity (for example, buildings) to carry out their activities.
                 Operations:  A charitable organization might prepare financial statements that compare inflows (for example, contributions) with outflows.  While these statements might appear similar to income statements, there would be no calculation of net income because the purpose of the charitable organization is to provide services to its constituents, not seek profits.
1.3           The balance sheet shows assets, liabilities and shareholders’ equity as of a specific date (the balance sheet date), similar to a snapshot.  The income statement and statement of cash flows report changes in assets and liabilities over a period of time, similar to a motion picture.
1.4           The auditor evaluates the accounting system, including its ability to record transactions properly and its operational effectiveness, and also determines whether the financial reports prepared by the firm’s managers conform to the requirements of the applicable authoritative guidance.  The auditor provides an audit opinion that reflects his professional conclusions.  For most publicly traded firms in the U.S. the auditor also provides a sepa-


1.4 continued.

                 rate opinion on the effectiveness of the firm’s internal controls over financial reporting.
1.5           Management, under the oversight of the firm’s governing board, prepares the financial statements.
1.6           Employees and suppliers of goods such as raw materials or merchandise often provide the services or goods before they are paid.  The firm has the benefit of consuming or using the goods or services before it transfers cash to the employees and suppliers.  The length of the financing period is the number of days between when the employees and suppliers provide goods and services and when the firm pays cash to those employees and suppliers.
1.7           Accounts receivable represent amounts owed by customers for goods and services they have already received.  The customer, therefore, has the benefit of the goods and services before it pays cash.  The length of the financing period is the number of days between when the customer receives the goods and services and when the customer pays cash to the seller of those goods and services.
1.8           Both kinds of capacity represent investments in long-lived assets, with useful lives (or service lives) that can extend for several or many years.  They differ in that land, buildings, and equipment represent physical capital, while patents and licenses represent intangible or intellectual capital.
1.9           A calendar year ends on December 31.  A fiscal year ends on a date that is determined by the firm, perhaps based on its business model (for example, many retailers choose a fiscal year end that is close to the end of January).  A firm can choose the calendar year as its fiscal year, and many do.  Both calendar years and fiscal years have 12 months.
1.10         Most firms report the amounts in their financial statements using the currency of the country where they are incorporated and conduct most of their business activities.  Some firms use a different currency.
1.11         A current item is expected to result in a cash receipt (assets such as accounts receivable) or a cash payment (liabilities such as accounts payable) within approximately one year or less.  A noncurrent item is expected to generate cash over periods longer than a year (assets, such as factory buildings that will be used to produce goods for sale over many years) or use cash over periods longer than a year (liabilities such as long term debt).  Users of financial statements would likely be interested in this distinction because the distinction provides information about short term cash flows separately from long term cash flows).


1.12         Historical amounts reflect the amounts at which items entered the firm’s balance sheet, for example, the acquisition cost of inventory.  Historical amounts reflect economic conditions at the time the firm obtained assets or obtained financing.  Current amounts reflect values at the balance sheet date, so they reflect current economic conditions.  For example, the historical amount for inventory is the amount the firm paid to obtain the inventory and the current amount for inventory is the amount for which the firm could sell the inventory today.
1.13         An income statement connects two successive balance sheets through its effect on retained earnings.  Net income that is not paid to shareholders as dividends increases retained earnings.  A statement of cash flows connects two successive balance sheets because it explains the change in cash (a balance sheet account) from operating, financing, and investing activities.  The statement of cash flows also shows the relation between net income and cash flows from operations, and changes in assets and liabilities that involve cash flows.
1.14         The U.S. Securities and Exchange Commission (SEC) is the government agency that enforces the securities laws of the U.S., including those that apply to financial reporting.  The Financial Accounting Standards Board (FASB) is the private-sector financial accounting standard setter in the U.S.  The International Accounting Standards Board (IASB) is a private- sector financial accounting standard setter that promulgates accounting standards that are required or permitted to be used in over 100 countries.  Neither the FASB nor the IASB has any enforcement powers.
1.15         U.S. GAAP must be used by U.S. SEC registrants and may be used by other firms as well.  International Financial Reporting Standards (IFRS) may be used by non-U.S. firms that list and trade their securities in the U.S, and these firms may also use U.S. GAAP.
1.16         The purpose of the conceptual framework developed by the Financial Accounting Standards Board (FASB) is to guide the standard setting decisions of the FASB.  For example, the conceptual framework specifies the purpose of financial reporting, and the qualitative characteristics of financial information that would serve that purpose.  FASB board members use this conceptual structure as they consider solutions to accounting issues.
1.17         The accrual basis of accounting is based on assets and liabilities, not on cash receipts and disbursements.  It provides a better basis for measuring performance because it is based on revenues (inflows of assets from customers) not cash receipts from customers, and on expenses (outflows of assets from generating revenues) not cash payments.  It matches revenues with the costs associated with earning those revenues and is not sensitive to the timing of expenditures.

2 comments:

  1. tìm thuê dịch vụ kế toán thuế trọn gói tại quận 6
    tìm thuê dịch vụ kế toán thuế trọn gói tại quận 7
    tìm thuê dịch vụ kế toán thuế trọn gói tại quận 8
    tìm thuê dịch vụ kế toán thuế trọn gói tại quận 9
    tìm thuê dịch vụ kế toán thuế trọn gói tại quận 10
    tìm thuê dịch vụ kế toán thuế trọn gói tại quận 11
    tìm thuê dịch vụ kế toán thuế trọn gói tại quận 12
    tìm thuê dịch vụ kế toán thuế trọn gói tại hoài đức
    tìm thuê dịch vụ kế toán thuế trọn gói tại sơn tây
    tìm thuê dịch vụ kế toán thuế trọn gói tại thường tín
    tìm thuê dịch vụ kế toán thuế trọn gói tại ứng hòa
    tìm thuê dịch vụ kế toán thuế trọn gói tại phú xuyên
    tìm thuê dịch vụ kế toán thuế trọn gói tại mỹ đức
    tìm thuê dịch vụ kế toán thuế trọn gói tại thanh oai
    tìm thuê dịch vụ kế toán thuế trọn gói tại đan phượng
    tìm thuê dịch vụ kế toán thuế trọn gói tại quốc oai
    tìm thuê dịch vụ kế toán thuế trọn gói tại phú thọ
    tìm thuê dịch vụ kế toán thuế trọn gói tại sóc sơn
    tìm thuê dịch vụ kế toán thuế trọn gói tại nhà bè
    tìm thuê dịch vụ kế toán thuế trọn gói tại cần giờ
    tìm thuê dịch vụ kế toán thuế trọn gói tại hóc môn
    tìm thuê dịch vụ kế toán thuế trọn gói tại củ chi
    tìm thuê dịch vụ kế toán thuế trọn gói tại bình chánh
    tìm thuê dịch vụ kế toán thuế trọn gói tại bình dương
    tìm thuê dịch vụ kế toán thuế trọn gói tại biên hòa
    tìm thuê dịch vụ kế toán thuế trọn gói tại huế
    tìm thuê dịch vụ kế toán thuế trọn gói tại đà nẵng

    ReplyDelete
  2. What an astonishing employment done by the essayist.
    Joseph Hayon

    ReplyDelete