{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Financial Accounting 02

Financial Accounting 02 - ofA lnformolion Quolities...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Quolities of Accounling lnformolion -rr--t I I I I I t Here's Where You've Been In Chopter 1, you leorned thot o business odds volue to moke o profit You leorned thot business tronsoctions con be clossified os operoting, investing, or finoncing. The four bosic finonciol stotements-the income stotement, the stotement of chonqes ln shoreholders' equily, thebolonce sheet, ond the stotement of cosh flows-provide informotion cbout these business processes | | / \ A il \/ t r-lere s vvnere You fe uotno When you ore finished withChopter 2, you should understond the quollties of the informotion in the finonciol stotements. You should be oble to recognize ond exploin the difference beMeen occruol bosis occountinq ond cosh bosis occountinq. frenrniryt W{#*fivps When you are finished studying this chapter, you should be able to: 1. Define generally accepted accounting principles and explain why they are necessary. 2. Explain the objective offinancial reporting and the qualities necessary to achieve this objective. 3. Identify the elements of the financial statements and describe their characteristics. 4. Define accrual accounting,explain how it differs from cash basis accounting,and identify examples of accrual accounting on actual financial statements. 5. Compute and explain the meaning of the current ratio. 6" Identify the risks and potential frauds related to financial accounting records, and explain the controls needed to ensure their accuracy. 49
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
CHAPTER I o QUALITIES OF ACCOUNTING INFORMATION #{dtss;V{affers In April 2006, with just two weeksuntil the start of histrial, Com- puter Associates International's former CEO, Sanjay KumaL pleaded guilty to securities fraud and obstruction of justice. Not only did Kumar engage in a conspiracy to inflate the firm's 2000 and 2001 sales revenue, he also authorized a $3.2 million payment to buy the silence of potential witnesses. In November 2006,he * was sentenced to 12 years in prison and fined $8 million for his part in the $2.2 billion fraud. Why would a smart and wealthy manfalsify accounting records, takingthe risk of a long prison sentence? Sometimes people in power beginto feel invincible. lt is important for every individual to have a strong sense of ethical behavior and to apply high moral standards to every business decision, no matter how small. Too often a number of seemingly small decisions can add up to one big crime. Information for Decision Making After Tom sold his first batch of T-shirts, he had some decisions to make. The biggest one was whether or not to continue in business. What he needed to know to evaluate that deci- sion was whether or not the company made a profit in January. Net profit is the amount left after all expenses are deducted from all revenues. For Tom's Wear, the accounting period is the first month of doing business, January 1 through January 31. Information about the month's operations is summarized on the income statement-one of the four basic financial statements.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern