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Unformatted text preview: Siciliano Chapter 2: Structure and I nter relationship of Financial Statements 1) Life Cycle of a company a. Close down or bought out by other companies b. Good ones continue to grow and prolong life by having successive periods of renewal c. Example: IBM, Intel, Apple 2) Ability to React to Change a. Change affects ability to capture and hold the market, grow business, profitably sell products and survive/prosper 3) Tracking Life Cycle of a Company a. Managers rely on reports to guide business decisions b. Investors rely on reports to guide investment decisions c. Government rely on reports to collect taxes and enforce laws d. Reports should provide information that is ARTistic i. Accurate : materiality (amount of money involved relative to the whole) 1. Should have sufficient accuracy without being too expensive or time-consuming ii. Relevant : useful iii. Timely : in time to be useful to those who need it e. Responsibility to produce information they can rely on i. Key characteristics of Accounting Process: Stability and Repetition ii. Repetition: process most data with least cost 1. Most common: monthly closing cycle (monthly process of closing the books to see how the company is doing with its objectives) 4) Accounting is Like a Football Game on Videotape a. Once a month, the Finance Department makes a report of the 1 st day of the month to the last day i. Balance Sheet = recorded action ii. Activities continue but balance sheet allows to take closer look at past transactions iii. Balance sheet is like a freeze frame when watching a recorded football game 1. Can analyze progress of income statement that has already occurred in detail...
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- Fall '10