m3l5 - David Robinson © D Robinson 2011 Fall 2011 Module 3...

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Unformatted text preview: David Robinson © D. Robinson, 2011 Fall 2011 Module 3 Accounting & Finance Lecture 5: Public Accounting Income Statement Accounting & Finance Accounting Finance Managerial Financial Auditing How investors use their money How firms raise money Three financial statements Forms of business Income St. Balance Sheet St. Cash Flows 2 Financial Accounting I • “Public” accounting • Introduction to Financial Accounting • Accrual accounting • The risk of fraud by lying about timing • Income Statement Why do we need “public” accountants? • Who owns Starbucks? Or Cisco, or Apple? The “Adam Smith” problem • The directors of such [joint-stock] companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own.... Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. Public Accounting • Conquers the “Adam Smith” problem: • Distant investors, corporations • Does most of the work of the Securities and Exchange Commission (SEC) • There’s much more to say about Auditing —we’ll come back to it For public companies, the accounts are, well, public! Public Companies have to file financial statements with the SEC • Now publicly available online once filed with the SE • pretty good summary on Yahoo! Finance • Quarterly statements (unaudited) “10-Q” • Annual statements (audited) “10-K” “Annual Reports” • Aren’t very useful— usually a self- congratulatory “puff piece” • Come out so late (6 to 9 months later) no serious investor would rely on them Read more on my website From Cash Basis to Accrual Accounting 16 Introducing Financial Accounting In the last lecture we calculated “Break Even” and profit at our simple t-shirt business, on what accountants would call a “ cash basis ” ... Cash basis: Making and selling...
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This note was uploaded on 04/04/2012 for the course UGBA 10 taught by Professor Xuanmingsu during the Fall '08 term at Berkeley.

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m3l5 - David Robinson © D Robinson 2011 Fall 2011 Module 3...

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