2.13 - Today's Topic Financial Accounting Information...

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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
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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
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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
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Fig. 91 WHICH ECONOMIC EVENTS TO RECOGNIZE Recognize Record in the accounting system; Show on the financial statements Example: Current Value
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Fig. 92 WHEN TO RECOGNIZE EVENTS POSSIBLE RULE (NOT USED) Recognize when cash moves only (Cash Basis) Unreliable – Too easily manipulated
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Fig. 93 WHEN TO RECOGNIZE EVENTS RULE USED Recognize when transaction occurs (Accrual Basis) Leads to rules for recognition of each transaction type. For example: Recognize cash when received or disbursed
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Fig. 94 HOW TO VALUE RECOGNIZED EVENTS Fair value of exchange transaction Benefit = Sacrifice (for both sides) When all else is equal, report worst case Delay reporting revenue until certain Never report assets at greater than current value
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Fig. 95 HOW TO PRESENT INFORMATION Various rules, such as: Four Financial Statements Notes/methods used to find to Financial Statements Current v Non-Current Balance Sheet
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Fig. 96 CASH Recognition When received When disbursed Valuation (Measurement) Face value Presentation Most liquid item Listed first in the Current Asset section of the Balance Sheet
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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 03/31/2008 for the course ACIS 2115 taught by Professor Jayardley during the Spring '07 term at Virginia Tech.

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2.13 - Today's Topic Financial Accounting Information...

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