Bus.312 Financial Accounting
Dr. Ahiarah
Your Name:___________________________
Date Submitted:________________________
STRUCTURED QUESTIONS TO BE ANSWERED FROM Chapter 01 Animated Chapter Presentation
(Except As Otherwise Directed) Please submit by class date, but no later than 01/31/2011. After due date, no
more than 30 points total.
To begin, note this very well: Expect To Reap What You Sow In The Course, i.e., What you will get out
of it will depend on what you put into it; this will be the case regardless of where you study this subject.
The following are learning objectives specified for this stage of your studies. They are akin to key
landmarks in this section of the ‘strange’ landscape of accounting that you are trying to get acquainted
with. They are listed to show you that the work you are asked to do relates to course learning expectations.
1.
2.
3.
4.
Define Accounting in general, and Financial Accounting, in particular. Handout
Name the different branches ("dialects") or sub-fields of Accounting. Handout
Explain who uses accounting information, how, why, and when; and describe types of accounting professionals.
Handout
Understand basic Financial Accounting vocabulary (terms and concepts), including, for example, asset, liability,
owner's equity, capital, revenue, expense, income/loss, etc. In addition, they should be able to distinguish between their
correct or erroneous use(s) (in multiple-choice scenarios, for example).
(SUNY Mobility Business Transfer Guide (SMP-BTG) Learning Outcome #2: Understanding of general
accounting concepts and processes)
1.02: Accounting and the Business Entity
1.03:Auditing and Credibility in Reporting (Handout)
1.04: Structure of the Acctg. Profession (Handout)
1.06: Types of Business Organizations
3.01 Income St. and B/Sh
3.02 Statement of Equity
3.03 Cash Flow Statement
3.04 Other Elements of the Annual Report
13.01 Accounting elements of annual report (See also
Annual Report Walkthrough)
13.02 Management elements of annual report (See also
Annual Report Walkthrough)
13.03 SEC reporting requirements (See also Annual
Report Walkthrough)
Answer each question clearly and responsively. You may use a separate sheet and answer in the order of
the questions, or answer each question directly below it expanding the workspace as necessary. Do not
write one-liners (unless verbatim from the referenced material) as those might not demonstrate the best
effort expected and that you are capable of. One-liners and unresponsive answers will not earn full marks.
ALL RESPONSES MUST BE TYPED OR WORD-PROCESSED; HAND-WRITTEN WORK WILL
NOT BE ACCEPTED OR GRADED. You may submit your work electronically.
Introduction
Introduction to
to Financial
Financial Statements
Statements
Forms of
Business
Organization
Sole
proprietorship
Partnership
Corporation
Chapter
1-4
Users and
Uses of
Financial
Information
Business
Activities
Internal users
Financing
External
users
Ethics in
financial
reporting
Investing
Operating
Communicating
with Users
A Quick Look
at Tootsie
Roll’
Roll’s Financial
Roll’s
Statements
Income
statement
Income
statement
Retained
earnings
statement
Retained
earnings
statement
Balance sheet
Statement of
cash flows
Interrelationships of
statements
Balance sheet
Statement of
cash flows
Other elements
of an annual
report
FIGURE 1-4 _____________________________
(1) From reading the handout below and the syllabus, write in the immediate space below: (a) Definition of
accounting in general; (b) Definition of financial accounting; and (c) Eight branches or subfields of
accounting listed. (Please, insert space as necessary to complete your answers!) 4 points____________
2
(2) You will notice from the diagram (Figure 1-4) above and from the Presentation, the three primary
forms of business entity or organization adopted in the United States. Immediately below, (A) Define a
Sole Proprietorship, and list four advantages and disadvantages of this type of business organization; (B)
Define a general Partnership, and list four advantages and disadvantages of this type of business
organization; and (C) Define a Corporation, and list four advantages and disadvantages of this type of
business organization (Please, insert space as necessary to complete your answers!) 5 points
______________________________________________________________________________________
______________________________________________________________________________________
_____________________________________________
Users
Users and
and Uses
Uses of
of Financial
Financial Information
Information
Internal Users
Management
IRS
Investors
Human
Resources
Common Questions
Finance
Labor
Unions
Creditors
Marketing
Customers
Chapter
1-6
SO 2
SEC
External
Users
Identify the users and uses of accounting information.
FIGURE 1-6
(3) In the space immediately below, list the six identified questions that the internal and external users of
an entity’s financial statements (see Figure 1-6 above) commonly ask (Please, insert space as necessary to
complete your answers!)_4 points___________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________
Business
Business Activities
Activities
All businesses are involved in three types of
activity —
financing,
investing,
and operating.
The accounting information system keeps track
of the results of each of these business
activities.
Chapter
1-14
SO 3
Explain the three principal types of business activity.
FIGURE 1-14
(4) In the space immediately below, write: (a) Definition and examples provided in the presentation of
FINANCING activities; (b) Definition and examples provided in the presentation of INVESTING
activities; and, (c) Definition and examples provided in the presentation of OPERATING activities
(Please, insert space as necessary to complete your answers!) 4 points______________________________
______________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
3
Other
Other Elements
Elements of
of an
an Annual
Annual Report
Report
U.S. companies that are publicly traded must
provide shareholders with an annual report.
The annual report always includes:
Financial statements.
Management discussion and analysis.
Notes to the financial statements.
Independent auditor's report.
Chapter
1-29
SO 6
Describe the components that supplement the
financial statements in an annual report.
FIGURE 1-29
(5) In the space immediately below, describe: (a) the Management discussion and analysis supplement of
the Annual Report; (b) the Notes to the financial statements supplement of the Annual Report; and, (c) the
Independent auditor’s report supplement of the Annual Report. (Please, insert space as necessary to
complete your answers!)_4 points___________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
________________________________________________
Communicating
Communicating with
with Users
Users
Companies
Companies prepare
prepare four
four financial
financial statements
statements from
from
the
the summarized
summarized accounting
accounting data:
data:
Income
Statement
Chapter
1-19
SO 4
Balance
Sheet
Retained
Earnings
Statement
Statement
of Cash
Flows
Describe the content and purpose of each of the financial statem ents.
FIGURE 1-19
(6a) Describe the content and purpose of the Income Statement as discussed in the presentation 2 points
(6b) What, specifically, are the amounts of (i) REVENUE, (ii) TOTAL EXPENSES, and (iii) NET
INCOME listed in the Sierra Corporation Income Statement used in the presentation? 3 points
(6c) Describe the content and purpose of the Retained Earnings (RE) Statement as discussed in the presentation.2 pts
(6d) What, specifically, are the amounts of (i) BEGINNING BALANCE OF RE, and (ii) ENDING BALANCE OF
RE, listed in the Sierra Corporation RE Statement used in the presentation? 2 points
(6e) Describe the content and purpose of the Balance Sheet as discussed in the presentation. 2 points
(6f) What, specifically, are the amounts of (i) TOTAL ASSETS, (ii) TOTAL LIABILITIES, and (iii) TOTAL
STOCKHOLDERS’ EQUITY listed in the Sierra Corporation Balance Sheet used in the presentation? 3 points
(6g) Describe the content and purpose of the Statement of Cash Flows (SCF) as discussed in the presentation. 2 pts
(6h) What, specifically, are the amounts of (i) NET CASH PROVIDED BY OPERATING ACTIVITIES, (ii) NET
CASH USED BY INVESTING ACTIVITIES, and (iii) NET CASH PROVIDED BY FINANCING ACTIVITIES, as
4
listed in the Sierra Corporation Statement of Cash Flows used in the presentation 3 points
HANDOUTS
Introduction: What is Accounting?
Areas (Sub-fields) of Accounting:
• For the purpose of this class, we will
adopt this definition: accounting is an
information system, (or a set-up) that
identifies, collects, processes, and
communicates to interested parties,
information about, mostly, the
financial affairs of an accounting
entity. (cf. Kimmel, Weygandt and Kieso, Financial Accounting,
Financial, Management, Tax, Auditing,
Govt’l, NFPOs, International, Systems
2007:6 ).
• Three Selected Areas of Accounting:
Financial, Management and Auditing
• The major distinction between financial and
management accounting is the users of the
information.
– Financial accounting serves external users.
– Management accounting serves internal
users, such as top executives,
management, and administrators
within organizations.
Introduction cont’d
• Financial accounting -The branch of
accounting which focuses on the
informational needs of decision makers
external to the organization, (such as
investors or stockholders, suppliers, banks,
and government agencies) and produces for
them general purpose financial statements
(Income Statement, Statement of Owners’
Equity, Balance Sheet, and Statement of
Cash Flow) intended to satisfy the needs.
Who Does Accounting?
The Professional Accountants
• The most common way to classify accountants is
to divide them into public accountants and private
accountants.
– Public accountants - those whose services are offered to
the general public on a fee basis as independent
contractors
– Private accountants - all other accountants, including
those who work for businesses, government agencies,
and other not-for-profit organizations as employees
Auditing
• A firm’s management is responsible for its financial
statements, which are, in a sense, a report of the
management’s performance. Since management can be
tempted to exaggerate its own performance in the reports,
audits are required because they enhance the credibility of
the reports--financial statements
• Auditing involves an examination of transactions and
financial statements made by auditors in accordance with
generally accepted auditing standards developed primarily
by the AICPA
• An audit includes:
– tests of the accounting records
– tests of the internal control system
– other audit procedures as deemed necessary
The Certified Public Accountant
• Today, the CPA - designation is earned by a
combination of 150 credit hours of college
education, qualifying experience, and the passing
of a computerized national examination.
• The CPA exam now covers the following
major areas:
– Auditing and attestation
– Financial accounting and reporting (business,
NFPOs and government)
– Regulation (taxation, law and prof. responsibilities)
– Business environment and concepts (new area)