Chapter 4 - Chapter 4 Notes Financial Reporting and...

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Chapter 4 Author: Anna Rovira Beavers Needles 2008 8/15/08 1 Financial Accounting Chapter 4 Notes Financial Reporting and Analysis I. Objectives of Financial Information a. To furnish information that is useful in making investments and credit decisions. b. To provide informant useful in assessing cash flow prospects c. To provide information about business resources, claims to those resources, and changes in them. Financial statements are most useful when presented periodical. Most important external reports are: 1. Income Statement 2. Balance Sheet 3. Statement of cash flow. II. Qualitative characteristics of Accounting Information Most important characteristics are: (Follow arrows)
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Chapter 4 Author: Anna Rovira Beavers Needles 2008 8/15/08 2 II. Conventions that help in the interpretation of Financial Statements. 1. Comparability The reader of the report can recognize similarities, differences, and trends over different time periods or between companies. EI: Same way of writing repots. 2. Consistency This convention requires that an accounting procedure should remain with the company from period to period. Example: Recording certain assets as a long-term asset and keeping the same rule, if changes are needed, then financial statements are reinstated and notes to financial statements are needed. 3. Materiality The relative importance of an event. Such as correcting or changing small errors that would not change the result of the particular account or financial statements. Example, and item of small price gets expense instead of depreciated. 4.
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This note was uploaded on 03/10/2011 for the course BUS 1B taught by Professor Kite during the Spring '11 term at Laney College.

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Chapter 4 - Chapter 4 Notes Financial Reporting and...

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