AEM220_227ToPost - AEM220, Introduction to Business...

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Unformatted text preview: AEM220, Introduction to Business Management. Wednesday 2/27 Accounting Accounting and the accounting process Financial statements Accounting procedures and standards Areas of Accounting Financial Accounting - Tax Accounting Annual Report Private Accountant Public Accountant C.P.A. assists with tax collection provides a means to analyze business Managerial Accounting - Inside Organization - C.M.A. - Auditing Financial reports pinpoint problems and opportunities The Accounting System Accounting Equation Assets = Liabilities + Owner's Equity Owned = Owed + Owner's Claims The "Typical" Balance Sheet Assets Liabilities Current assets Cash Accounts Receivable Notes Receivable Inventory Current liabilities Accounts Payable Notes Payable Accrued Taxes Accrued Salaries Fixed assets Land Buildings Long-term liabilities Notes payable Bonds payable Depreciation Depreciation Capital equipment Owner's Equity Stock shares Retained earnings The "Typical" Income Statement Net Sales Cost of Goods Sold Gross Profit Operating Expenses Net Profit Before Interest and Taxes Interest Taxes Net Profit After Taxes - Accounting Procedures - Examples Inventories FIFO: First In, First Out LIFO: Last In, First Out Systematic write-off of the cost of a tangible asset over its estimated useful life Straight-line Accelerated Depreciation Accounting is not an exact science Accounting Standards GAAP: Generally Accepted Accounting Principles FASB: Financial Accounting Standards Board SEC: Securities and Exchange Commission CPA: Certified Public Accountant IAS: International Accounting Standards IASB: International Accounting Standards Board (London) "Pro-forma" accounting A statement of the company's financial activities while excluding unusual and nonrecurring expenses when stating how much money the company actually made. company restructuring costs, a decline in the value of the company's investments, adjusting the current balance sheet to fix faulty accounting practices in previous years. How to Read a Corporate Annual Report W Read management's discussion of changes in operations. Try to identify strengths or weaknesses. W Review the firm's consolidated balance sheet. (Its assets, liabilities, and owner's equity.) W Analyze the Income Statement. Look beyond the year (Sales drops can spell trouble). W Review the statement of changes in cash flows. W Review auditor's opinion. Take-Aways "Financial information is the heartbeat of competitive business. Accounting keeps the heartbeat stable" Reading financial statements and annual reports is a required skill in 21st century U.S. Accounting is not an exact science. Try to understand why. ...
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