2811422508

2811422508 - Chapter 1 The Financial Statements Check...

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Chapter 1 The Financial Statements Check Points (5 min.) CP 1-1 Store manager decisions: a. What food items to offer and how to market the goods b. Where to locate a restaurant c. How to finance operations Accounting helps managers measure the revenue from food sales, the cost of the food, and the profit (or loss) on each food item. Accounting also helps measure which Taco Bells are most profitable and which are losing money. Finally, accounting helps managers decide how to finance operations. Items on YUM! Brands’ income statement that help decide whether to invest in the company: The company earned a net income (rather than a net loss). This year’s net income is more than last year’s. Net sales revenue is increasing from year to year. Student responses may vary. Chapter 1 The Financial Statements 1
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(5 min.) CP 1-2 Accounting is the information system that measures business activities, processes data into reports, and communicates results to people. Bookkeeping is only a part of accounting. Bookkeeping is related to accounting as arithmetic is related to mathematics. (5 min.) CP 1-3 Standards of professional conduct are designed to produce relevant and reliable information for decision making . People need relevant and reliable information in order to make wise decisions. If accountants had no ethical guidelines, companies could report inaccurate information. This could cause people to invest in the wrong companies and lose money. Financial Accounting 5/e Solutions Manual 2
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(5 min.) CP 1-4 1. Novak can be misled into believing that YUM! Brands owns more assets than it actually has. 2. The entity concept applies. 3. Application of the entity concept will separate Novak’s personal assets from the assets of YUM! Brands. This will help Novak, investors, and lenders know how much in assets the business controls, and this knowledge will help all parties evaluate the business realistically. (5 min.) CP 1-5 1. Owners’ Equity = Assets – Liabilities This way of determining the amount of owners’ equity applies to eBay, Coca-Cola, your household, a Pizza Hut restaurant, or any other organization. 2. Liabilities = Assets – Owners’ Equity 3. Total Assets = Total Liabilities + Total Owners’ Equity Chapter 1 The Financial Statements 3
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(5 min.) CP 1-6 1. Assets are the economic resources of a business that are expected to produce a benefit in the future. Owners’ equity represents the insider claims of a business, the owners’ interest in its assets Assets and owners’ equity differ in that owners’ equity is a claim to assets, whereas assets are resources. Assets must be at least as large as owners’ equity, so equity can be smaller than assets. 2. Both liabilities and owners’ equity are claims to assets.
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This note was uploaded on 04/07/2008 for the course ACCT 203 taught by Professor Fewox during the Spring '08 term at CofC.

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2811422508 - Chapter 1 The Financial Statements Check...

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