Chapter 2 - PART TWO 2 Preparing and Using Financial...

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PART TWO 2 Preparing and Using Financial Accounting’s Reports C2 Measuring and Evaluating Financial Position C3 Measuring and Evaluating Financial Performance C4 Measuring and Evaluating Cash Flow C5 Standards and Principles Surrounding the Financial Statements The four chapters in this group introduce the set of financial statements and the principles and environment that influence, even determine, their nature. Chapter 2 examines the balance sheet, the reflection of the accounting system’s accumulation of information over the life of the enterprise. The history and present nature of the “double-entry” system and its “debits and credits” are covered, as is how to interpret the resulting financial statement. The balance sheet’s depiction of the enterprise’s legal structure and sources of financing is reviewed. Chapter 3 uses the same approach to introduce the income statement, which is accrual accounting’s fundamental measure of financial performance, and the statement of retained earnings, which connects the income statement to the balance sheet. NEL
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NEL Chapter 4 introduces the cash flow statement, which is both the fourth regular financial statement and a major example of user-oriented accounting analysis. Chapter 5 completes the introduction of the financial statements by dealing with a variety of preparation and use principles and environmental forces (such as auditing, ethics, international agreements, and the stock market) acting on financial accounts.
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For information on this topic, please visit the online tutorial at www.gibbins6e.nelson.com NEL Chapter Introduction: Measuring and Evaluating Financial Position 2.1 CHAPTER TWO 2 Measuring and Evaluating Financial Position “I am pleased that Sleeman continues to move in a positive direc- tion and I am confident we will continue to make strategic deci- sions that benefit both our customers and our shareholders.” 1 There are two significant strategic investments disclosed in Sleeman’s 2004 annual report. The first is the investment in capi- tal projects expected to reduce operating costs at the Guelph brewery by $1.5 million annually. The second, aimed at growth in sales and income, is the acquisition of Unibroue, considered Quebec’s premier brewer of craft beers and the largest micro- brewery in the province. Both of these investments were made in management’s ongoing quest for growth not only in sales but also in returns to the shareholders. To achieve these goals, the return earned on these assets must be sufficient to pay the interest costs on the funds borrowed to make the investments, return the capital invested, and add to the earnings of the shareholders. Shareholders benefit from these returns either through the receipt of dividends or the through an increase in the market value of their shares.
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This note was uploaded on 10/22/2009 for the course ACCOUNTING 30516 taught by Professor Whoever during the Spring '09 term at American Academy of Art.

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Chapter 2 - PART TWO 2 Preparing and Using Financial...

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