919ST - Today’s Topic PLEASE TURN OFF CELL PHONES...

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Unformatted text preview: Today’s Topic PLEASE TURN OFF CELL PHONES Financial Accounting Information System Measurement Rule (GAAP ) Measurement Application (Double-Entry System ) Communication (Financial Statements ) This class will describe GAAP in general and as it applies to : Balance Sheet: Cash, Accounts Receivable, Accounts Payable Income Statement: Revenue, Expense Statement of Cash Flow effect Fig 89. Overview of Accounting and Decision-Making CONTEXT PROCESS DATA INFORMATION DECISION SYSTEM T R A N S A C T I O N S Accounting System Financial Statements Income, Value Investment Decision Invest or not GAAP Market Price Invest or Not Fig. 90 GAAP IDENTIFYING ECONOMIC EVENTS: ACCOUNTING PRINCIPLES AND STANDARDS • Which economic events to recognize • When to recognize events • How to value recognized events • How to present information Fig. 91 WHICH ECONOMIC EVENTS TO RECOGNIZE ________________________ Record in the accounting system; Show on the financial statements Example: Current Value Fig. 92 WHEN TO RECOGNIZE EVENTS POSSIBLE RULE (NOT USED) Recognize when cash moves only ( Basis) Unreliable – Too easily manipulated Fig. 93 WHEN TO RECOGNIZE EVENTS RULE USED Recognize when transaction occurs ( Basis) Leads to rules for recognition of each transaction type. For example: Recognize cash when received or disbursed Fig. 94 HOW TO VALUE RECOGNIZED EVENTS • Fair value of exchange transaction • Assuming willing seller & buyer • = (for both sides) • When all else is equal, report worst case – Delay reporting revenue until certain – Never report assets at greater than current value Fig. 95 HOW TO PRESENT INFORMATION Various rules, such as: • Financial Statements • to Financial Statements • Current v Non-Current Balance Sheet Fig. 96 CASH Recognition When received When disbursed Valuation (Measurement) Face value Presentation Most liquid item Listed in the Current Asset section of the Balance Sheet Event 1: Conner Consultants was started on January 1, 2004, when it acquired $5,000 cash by issuing common stock. 1. Increase assets (cash)....
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This note was uploaded on 03/18/2008 for the course ECON 2006 taught by Professor Rdcothren during the Fall '08 term at Virginia Tech.

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919ST - Today’s Topic PLEASE TURN OFF CELL PHONES...

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