Acct Chap 2 - 1 Chapter 2 Financial Statements and the...

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Unformatted text preview: 1 Chapter 2 Financial Statements and the Annual Report 2 Financial Reporting ● Objective of financial reporting is to PROVIDE INFORMATION for decision-making ● Information must be USEFUL if used for decision-making ● For information to be USEFUL – must have certain qualitative characteristics 3 Qualitative Characteristics Understandability - Relevance - Reliability - To those willing to take the time to understand it Represents what it purports to Has capacity to make a difference 4 Qualitative Characteristics between companies Comparability from one period to the next Consistency 5 Qualitative Characteristics Materiality Conservatism All else equal, choose least optimistic alternative Will it make a difference to the decision maker? 6 The Basic Financial Statements ● Balance Sheet » Usually CLASSIFIED – requires understanding of operating cycle ● Income Statement » Single-Step or Multi-Step ● Retained Earnings Statement » May be combined in Statement of Stockholders’ Equity ● Statement of Cash Flows 7 The Concept of Operating Cycle CASH Time it takes to go from cash back to cash A FEDERAL RESERVE NOTE THE UNITED STATES OF AMERICA THE UNITED STATES OF AMERICA L70744629F 12 12 12 12 L70744629F ONE DOLLAR ONE DOLLAR WASHINGTON, D.C....
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This note was uploaded on 02/27/2010 for the course FIN 311 taught by Professor Haan during the Spring '10 term at St. Josephs NY.

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Acct Chap 2 - 1 Chapter 2 Financial Statements and the...

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