1.2 - FINANCIAL REPORTING - ENVIRONMENT System - an...

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FINANCIAL REPORTING - ENVIRONMENT System - an established and orderly way of doing things (how it fits together) (Businesses use these financial statements (4 types)??) PRIMARY( INVESTORS AND MANAGEMENT ) SECONDARY( OLD AND NEW INVESTORS ) PREPARER USER USER BUSINESS O ------------ INFORMATION ------- O O -- INFORMATION --- O SUBSEQUENT ENTITY T ( OTHER THAN FINANCIAL REPORTS ) T INITIAL T ( OTHER THAN FINANCIAL REPORTS ) T INVESTORS FORM DIRECTORS H E FINANCIAL REPORTS H E INVESTORSA N D H E FINANCIAL REPORTS H E MANAGEMENT R ------------FUNDS-------------- R OTHERS R <---- FUNDS ----- R ETHICS S -------------SECURITIES ---------- (STOCKS, BONDS, NOTES) S S ----SECURITIES- S ADVISORS CONTROL ADVISORS CONTROL ADVISORS SEC THE INVESTOR S ADVOCATE SEC FASB -ACTNG/REPORTING STANDARDS FASB PCAOB – AUDITING STANDARDS PCAOB ` INDEPENDENT AUDIT AUDIT AICPA AICPA WILLIAM WELLS 1989-2007 1 5/12/2009
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FINANCIAL REPORTING – COSTCO’S ANNUAL REPORT DIMENSIONS Frequency – significant events (8-K), quarterly (10-Q), annually (10-K) to SEC and Stockholders Reason – moral obligation (stewardship), contractual obligation (lenders), legal requirement (SEC) Page Content Comments 2-5 Letter to shareholders from the Chairman of the Board and/or President Optional – stewardship responsibility fulfilled 6-20 Overview of Costco and its activities Optional 21-35 Management discussion and analysis (MD&A) Required - To be discussed 35-36 37-38 Certifications CEO and CFO Independent Auditors Required - To be discussed 39 Statements Balance Sheet Required - To be discussed 40 Income Required - To be discussed 41 Stockholders Equity Required - To be discussed 42 Cash Flow Required - To be discussed 43-70 Notes Required - To be discussed 71-73 Miscellaneous Required in part – not discussed WILLIAM WELLS 1989-2007 2 5/12/2009
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FINANCIAL REPORTING - THE ACCOUNTING CYCLE FIGURE OUT WHAT HAPPENED EVENT HAPPENS RELEVANT ? OBJECTIVELY MEASURABLE ? INTERPRET EVENT ACCOUNTS ? AMOUNTS ? DIRECTION ? ENTER INTO RECORDS ENTER INTO JOURNAL GENERAL SPECIAL POST TO LEDGER GENERAL SUBSIDIARY PRELIMINARY WORK BEFORE STATE - MENTS PREPARED UNADJUSTED TRIAL BALANCE SUM LEDGER ACCOUNTS POST TO WORKSHEET RESOLVE NONBALANCE SITUATIONS ADJUSTING ENTRIES REPEAT ABOVE PROCESS ADJUSTED TRIAL BALANCE COMPLETE THE WORKSHEET RESOLVE NONBALANCE SITUATIONS CLOSE TEMPORARY ACCOUNTS CLOSE REV / EXP TO INCOME SUMMARY CLOSE INCOME SUMMARY TO RET . EARNINGS CLOSE DIVIDEND ACCOUNT TO RET . EARNINGS POST - CLOSING TRIAL BALANCE ( PERM ACTS ) WILLIAM WELLS 1989-2007 3 5/12/2009
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PREPARE FINANCIAL STATEMENTS AND NOTES THERETO PREPARE STATEMENTS Statement of Earnings Statement of Retained Earnings Statement of Financial Position Statement of Cash Flows WILLIAM WELLS 1989-2007 4 5/12/2009
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FINANCIAL REPORTING – THE BASIC EQUATION THE BASIC ACCOUNTING EQUATION Item Ownership claims Pencil = Yourself Car = Bank (lender) Yourself Coat = Store (creditor) Things (of value you own or control, e.g. equipment = Categories of claims against the resources (can not spend claims) Resources = Claims against those resources Lenders (Creditors ) + Yourself (Owner ) ASSETS = LIABILITIES + EQUITY A = L + OE = + = + = + = + = + = + NOTE: Double entry aspect of model WILLIAM WELLS 1989-2007 5 5/12/2009
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This note was uploaded on 04/29/2008 for the course ACCTG 215 taught by Professor Wells during the Spring '08 term at University of Washington.

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1.2 - FINANCIAL REPORTING - ENVIRONMENT System - an...

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