slideshow for acct2020 introduction to accounting for non-business majors chapter 5

8/20/2019 Slideshow for ACCT2020 Introduction to Accounting for Non-Business Majors Chapter 5

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Communicating and InterpretingCommunicating and Interpreting

Accounting InformationAccounting InformationChapter 5

McGraw-Hill/Irwin © 2009 he McGraw-Hill Companie!" Inc#


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McGraw-Hill/Irwin Slide 2

An An unqualifiedunqualified opinion states that theopinion states that thefinancial statements are fairfinancial statements are fair

presentations in all material respects inpresentations in all material respects in

conformity with GAAP.conformity with GAAP.

An An unqualifiedunqualified opinion states that theopinion states that thefinancial statements are fairfinancial statements are fair

presentations in all material respects inpresentations in all material respects in

conformity with GAAP.conformity with GAAP.

Independent AuditorsInde

pendent AuditorsVerificationVerification

Partners, Managers, Staff Partners, Managers, Staff Guided by GAASGuided by GAAS




ManagementMana

gementPreparationPreparation

CE, C!, Accounting Staff CE, C!, Accounting Staff Guided by GAAP Guided by GAAP

ManagementMana



$la%er! in the AccountingCommunication $roce!!


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McGraw-Hill/Irwin Slide "

InformationInformationIntermediariesIntermediaries

Analysis and Advice Analysis and Advice

!inancial analysis,!inancial analysis,#nformation ser$ices#nformation ser$ices


Analysis and Advice Analysis and Advice

!inancial analysis,!inancial analysis,#nformation ser$ices#nformation ser$ices !inancial analysts ma%e!inancial analysts ma%epredictions concerningpredictions concerning

companies& future earningscompanies& future earnings

and stoc% prices.and stoc% prices.

!inancial analysts ma%e!inancial analysts ma%epredictions concerningpredictions concerning

companies& future earningscompanies& future earnings

and stoc% prices.and stoc% prices.

$la%er! in the AccountingCommunication $roce!!







ManagementMana



ManagementMana




4/15

McGraw-Hill/Irwin Slide '

GovernmentGovernmentRegulatorsRe

gulatorsVerificationVerification

SEC Mem(ersSEC Mem(ersGuided by SEC regs.Guided by SEC regs.

GovernmentGovernmentRegulatorsRe

gulatorsVerificationVerification

SEC Mem(ersSEC Mem(ers

Guided by SEC regs.Guided by SEC regs.

UsersUsers Analysis and Decision Analysis and Decision

#n$estors, )enders, etc.#n$estors, )enders, etc.

UsersUsers Analysis and Decision Analysis and Decision#n$estors, )enders, etc.#n$estors, )enders, etc. Public

companies only

ManagementMana


C!, CE, Accounting Staff C!, CE, Accounting Staff Guided by GAAP Guided by GAAP

ManagementMana


C!, CE, Accounting Staff C!, CE, Accounting Staff Guided by GAAP Guided by GAAP


Analysis and Advice Analysis and Advice!inancial analysis,!inancial analysis,

#nformation ser$ices#nformation ser$ices


Analysis and Advice Analysis and Advice!inancial analysis,!inancial analysis,

#nformation ser$ices#nformation ser$ices



Partners, Managers, Staff Partners, Managers, Staff

Guided by GAASGuided by GAAS





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McGraw-Hill/Irwin Slide *

Guiding $rinciple! for Communicating&!eful Information

Primary Objective of External inancial ReportingPrimar

y Objective of External inancial Reporting

!o provide economic information to external users!o provide economic information to external usersfor decision ma"ing#for decision ma"ing#

Primary Objective of External inancial ReportingPrimar

y Objective of External inancial Reporting

!o provide economic information to external users!o provide economic information to external usersfor decision ma"ing#for decision ma"ing#

Primary $ualitative %&aracteristicsPrimar

y $ualitative %&aracteristics

Relevance'Relevance' !imely and Predictive eedbac" (alue!imely and Predictive eedbac" (alue

Reliability'Reliability' Accurate) Unbiased) and (erifiableAccurate) Unbiased) and (erifiable

Primary $ualitative %&aracteristicsPrimar


Relevance'Relevance' !imely and Predictive eedbac" (alue!imely and Predictive eedbac" (alue

Reliability'Reliability' Accurate) Unbiased) and (erifiableAccurate) Unbiased) and (erifiable

*econdary $ualitative %&aracteristics*econdar


%omparability'%omparability' Across businessesAcross businesses

%onsistency'%onsistency' Over timeOver time

*econdary $ualitative %&aracteristics*econdar


%omparability'%omparability' Across businessesAcross businesses

%onsistency'%onsistency' Over timeOver time


6/15

McGraw-Hill/Irwin Slide +

Annual 'eport!

(or(or pri)atel%pri)atel% held companie!" annualheld companie!" annualreport! are !imple document! thatreport! are !imple document! that

include*include*

+#+# (our ,a!ic nancial !tatement!#(our ,a!ic nancial !tatement!#2#2# 'elated note! .footnote!#'elated note! .footnote!#

## 'eport of independent accountant! .auditor1!'eport of independent accountant! .auditor1!

opinion if the !tatement! are audited#opinion if the !tatement! are audited#

(or(or pri)atel%pri)atel% held companie!" annualheld companie!" annualreport! are !imple document! thatreport! are !imple document! that

include*include*

+#+# (our ,a!ic nancial !tatement!#(our ,a!ic nancial !tatement!#

2#2# 'elated note! .footnote!#'elated note! .footnote!#

## 'eport of independent accountant! .auditor1!'eport of independent accountant! .auditor1!

opinion if the !tatement! are audited#opinion if the !tatement! are audited#


7/15McGraw-Hill/Irwin Slide

Annual 'eport!

(or(or pu,licpu,lic companie!companie!" annual" annualreport! are ela,orate due to 3Creport! are ela,orate due to 3C

reporting re4uirement!*reporting re4uirement!*

1.1. A Nonfnancial Section A Nonfnancial Section A letter to the !tocholder!" aA letter to the !tocholder!" a

de!cription of management1!de!cription of management1!

philo!oph%" product!" !ucce!!e!" etc#philo!oph%" product!" !ucce!!e!" etc#2.2. A Financial Section A Financial Section

ee ne6t !lide for a detailed li!ting # # #ee ne6t !lide for a detailed li!ting # # #

(or(or pu,licpu,lic companie!companie!" annual" annualreport! are ela,orate due to 3Creport! are ela,orate due to 3C

reporting re4uirement!*reporting re4uirement!*

1.1. A Nonfnancial Section A Nonfnancial Section A letter to the !tocholder!" aA letter to the !tocholder!" a

de!cription of management1!de!cription of management1!

philo!oph%" product!" !ucce!!e!" etc#philo!oph%" product!" !ucce!!e!" etc#2.2. A Financial Section A Financial Section

ee ne6t !lide for a detailed li!ting # # #ee ne6t !lide for a detailed li!ting # # #


8/15McGraw-Hill/Irwin Slide -

Annual 'eport!

+#+# ummari7ed nancialummari7ed nancialdata for 5- or +0-%ear!#data for 5- or +0-%ear!#

2#2# Management 8i!cu!!ionManagement 8i!cu!!ionand Anal%!i! .M8A#and Anal%!i! .M8A#

## he four ,a!ic nancial he four ,a!ic nancial!tatement!#!tatement!#

:#:# ;ote! .footnote!#;ote! .footnote!#

5#5# IndependentIndependentAccountant1! 'eportAccountant1! 'eportand the Managementand the ManagementCertication#Certication#

+#+# ummari7ed nancialummari7ed nancialdata for 5- or +0-%ear!#data for 5- or +0-%ear!#

2#2# Management 8i!cu!!ionManagement 8i!cu!!ionand Anal%!i! .M8A#and Anal%!i! .M8A#

## he four ,a!ic nancial he four ,a!ic nancial!tatement!#!tatement!#

:#:# ;ote! .footnote!#;ote! .footnote!#

5#5# IndependentIndependentAccountant1! 'eportAccountant1! 'eportand the Managementand the ManagementCertication#Certication#

# ?i!t! of director! and?i!t! of director! ando@cer! of theo@cer! of thecompan% and rele)antcompan% and rele)antaddre!!e!#addre!!e!#

# ?i!t! of director! and?i!t! of director! ando@cer! of theo@cer! of thecompan% and rele)antcompan% and rele)antaddre!!e!#addre!!e!#


9/15McGraw-Hill/Irwin Slide

3C 'eport! +0-B" +0-" >-B

orm +,-. Annual Report//ue 0it&in 1, days of t&e fiscal year-end#/%ontains audited financial statements#

orm +,-. Annual Report//ue 0it&in 1, days of t&e fiscal year-end#/%ontains audited financial statements#

orm +,-$ $uarterly Report//ue 0it&in 23 days of t&e end of t&e 4uarter#/inancial statements can be unaudited#

orm +,-$ $uarterly Report//ue 0it&in 23 days of t&e end of t&e 4uarter#/inancial statements can be unaudited#

orm 5-. %urrent Report//ue 0it&in +3 days of t&e major event date#/inancial statements can be unaudited#

orm 5-. %urrent Report//ue 0it&in +3 days of t&e major event date#/inancial statements can be unaudited#


10/15McGraw-Hill/Irwin Slide 01

Cla!!ied Income tatement

General Format for the Classified Income StatementGeneral Format for the Classified Income Statement



3arning! $er hare

Basic EPSBasic EPSBasic EPSBasic EPS

EPS =Net Income*

Average Number of Shares of Common Stoc!utstanding "uring the Period

#f there are preferred di$idends, the#f there are preferred di$idends, theamount is su(tracted from the 3etamount is su(tracted from the 3et

#ncome in the numerator.#ncome in the numerator.



;ote! to (inancial tatement!

4escriptions of the %ey accounting rules4escriptions of the %ey accounting rulesthat apply to the company&s statements.that apply to the company&s statements.4escriptions of the %ey accounting rules4escriptions of the %ey accounting rulesthat apply to the company&s statements.that apply to the company&s statements.

Additional detail supporting reported Additional detail supporting reportednum(ers.num(ers.

Additional detail supporting reported Additional detail supporting reportednum(ers.num(ers.

5ele$ant financial information not5ele$ant financial information notdisclosed on the statements.disclosed on the statements.

5ele$ant financial information not5ele$ant financial information notdisclosed on the statements.disclosed on the statements.


13/15McGraw-Hill/Irwin Slide 0"

8i!continued Dperation!

Income or loss onIncome or loss on

segment6s operation forsegment6s operation for

t&e period#t&e period#

Income or loss onIncome or loss on

segment6s operation forsegment6s operation for

t&e period#t&e period#

Gain or loss onGain or loss on

disposal of t&edisposal of t&e

segment#segment#

Gain or loss onGain or loss on

disposal of t&edisposal of t&e

segment#segment#

Sale or a(andonment of aSale or a(andonment of a segmentsegment of aof a

(usiness.(usiness.

Show net of applica(le ta6es.Show net of applica(le ta6es.


14/15McGraw-Hill/Irwin Slide 0'

36traordinar% Item!

UnusualUnusual Infre4uentInfre4uent

Show net of applica(le ta6es.Show net of applica(le ta6es.

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