Date of Final Exam: 1:30 class: Thursday, 4/30, at 2:50 p.m.
Private Company: Public cannot see what private companies are putting on the financial statements. The companys shares/stocks are not traded in the public. Public Company: There is evidence of ownership (shares) that is traded in the public domain SEC: Securities and Exchange Commission. SEC is a regulatory agency 10-K: an annual report filed with the SEC by publicly traded companies Solvency: ability to pay debts as they become due Profitability: ability to generate income Accounts Receivable: Amount customers owe the company Liabilities (example: accounts payable): Amounts the company owe others Periodicity: the subdividing of an entitys life into time periods for reporting economic activities Regulatory Agency: regulates all public companies in the US
Generally Accepted Account Principles (GAAP): financial statements are
currently prepared according to GAAP that have been adopted in order to achieve a presentation of financial information that is understandable by users as well as relevant and reliable for decision making.
Two authorities primarily responsible for establishing GAAP in the US are SEC and FASB (Financial Accounting Standards Board)
FASB Accounting Standards Codification became the source of authoritative
GAAP FASBs three primary goals in developing the Codification: o 1) simplify user access by codifying in one source all authoritative GAAP in US o 2) to ensure that the codified content accurately represented authoritative US GAAP as of July 1, 2009 o 3) to create a codification research system that is up to date for the released results of standard activity SEC and FASB have worked closely together in the development of accounting policy (SEC is more supportive role)
Statements of Financial Accouting Standards (SFASs): Issued by FASB
Financial Statements: A corporate annual report contains four basic financial
statements 1. Balance sheet: shows the financial position assets, liabilities, and stockholders equity of the firm on a particular date, such as the end of a quarter or year 2. Income Statement presents the results of operations revenues, expenses, net profit or loss, and net profit or loss per share for the accounting period 3. Statement of Comprehensive Income 4. Statement of Stockholders Equity reconciles the beginning and ending balances of all accounts that appear in stockholders equity section of the balance sheet. 5. Statement of Cash Flows provides information about the cash inflows and outflows from operating, financing, and investing activities during an accounting period
Balance Sheets= Statement of Financial Position
Cash= savings acct, checking acct Income Statement= Statement of Earnings, Statement of Operations, Statement of Profit + Loss Revenue= Net Revenue, Sales, Net Sales Revenue: sales price the company charge for the services they perform Net Income= Net Earning, Net Profit
Statement of Stockholders Equity= Statement of Retained Earnings
Notes to Financial Statements: Explains everything in the financial statement.
This section provides additional information, and explains items on the financial statement. MD&A: Managements Discussion and Analysis Forward-Looking Information Mean: Forward-looking information is the prediction of things that will happen in the future Safe Harbor Clause: The interpretation of what may happen in the future but doesnt necessarily have to happen. Can be found in the MD&A. Required statement in 10-K
Litigation: Lawsuits against the company
Auditors Report: Report to see if the financial statements comply with the GAAP
"The Language of Business: How Accounting Tells Your Story" "A Comprehensive Guide to Understanding, Interpreting, and Leveraging Financial Statements for Personal and Professional Success"