Companies most frequently provide
(1) the balance sheet,
(2) the income statement,
(3) the statement of cash flows, and (4) the statement of owners or stockholders equity.
Financial reporting other than financial statements may take various forms.
The balance sheet provides information about the nature and amounts of investments in a
companys resources, obligations to creditors, and owners equity. The balance sheet contributes
to financial reporting by providing a basis for
(1) computing rates of r
The income statement provides investors and creditors with information that helps them
predict the amounts, timing, and uncertainty of future cash flows.
- Also, the income statement helps users determine the risk (level of uncertainty) of not
The accounting profession needs a conceptual framework to
(1) build on and relate to an established body of concepts and objectives,
(2) provide a framework for solving new and emerging practical problems,
(3) increase financial statement users understand
The major characteristics of property, plant, and equipment are as follows.
(1) They are acquired for use in operations and not for resale.
(2) They are long-term in nature and usually subject to depreciation.
(3) They possess physical substance.
To be reported as cash, an asset must be readily available for the payment of current
obligations and free from contractual restrictions that limit its use in satisfying debts.
- Cash consists of coin, currency, and available funds on deposit at the bank.
Only one inventory account, Inventory, appears in the financial statements of a merchandising
- A manufacturer normally has three inventory accounts: Raw Materials, Work in
Process, and Finished Goods.
- Companies report the cost assigned to good
Some of the applications of present valuebased measurements to accounting topics are
(3) pensions and other postretirement benefits,
(4) long-term assets,
(5) sinking funds,
(6) business combinations,
(7) disclosures, and
If inventory declines in value below its original cost, for whatever reason, a company should
write down the inventory to reflect this loss.
- The general rule is to abandon the historical cost principle when the future utility