Introduction to Financial Accounting- Module 1 - Outcomes
Introduction to Financial Accounting
Accounting is the language of business
We have strict standards for external
reporting to provide comparability and consistency of the financial information
disclosed. Internal or managerial accounting is different and used as a tool
for planning and decision making. The major differences of the two types of
accounting can be summarized as follows.
Financial Accounting
Managerial Accounting
Generally Accepted Accounting Principles
(US GAAP)
No required rules or standards
Standardized financial statements (balance
sheet, income statement, and statement of cash flows)
Budgets, cost reports, performance reports,
and types of special analysis
Emphasis on historical data
Emphasis on future data
External users
Internal users
Generally Accepted Accounting Principles
(GAAP) refer to the standards promulgated by the Financial Accounting Standards
Board (FASB). All U.S. publicly held companies and other companies audited by
external auditors must adhere to these standards. Publicly held companies must
file a number of reports with the Securities and Exchange Commission (SEC)
including quarterly and annual financial statements. These statements are
typically released to the public and published on the corporate website. The
annual report is traditionally associated with the release of financial
information to the public.
The four financial statements required by
US GAAP are:
•The income statement
•The balance sheet (or statement of
financial position)
•The statement of cash flow
•The statement of retained earnings
The IASB (International Accounting
Standards Board) issues IFRS (International Financial Reporting Standards).
These standards are embraced worldwide. FASB and IASB are currently working on
a convergence project.
The Profession
The American Institute of Certified Public
Accountants (AICPA) states on its homepage
(http://www.aicpa.org/Career/CareerPaths/Pages/CareerPaths.aspx) that the below
specializations are available career paths to a certified public accountant
(CPA).
•Forensic and Valuation Services Taxation
•Fraud Prevention, Detection &
Investigation
•Audit
•Business and Industry
•Government
•Personal Financial Planning
•PrimePlus/ElderCare
•Employee Benefit Plan Audit
•Information Technology (IT)
For further information about the CPA
profession and rules for licensing go to the websites for AICPA or the National
Association of State Boards of Accountancy (NASBA).
Required Background Material
Baruch College - The City University of New
York (CUNY). (2008) Guide to Financial Statements. Retrieved from
http://www.baruch.cuny.edu/tutorials/statements/view_tutorial.html
This is a 45-minute interactive video
presentation with audio. It is an excellent introduction and overview of financial
statements. You do not have to watch the whole presentation at one time since
it is easy to restart at different points. The information is also available in
a PDF file.
Securities and Exchange Commission (SEC).
(2007). Beginners' Guide to Financial Statements. Retrieved from
http://www.sec.gov/investor/pubs/begfinstmtguide.htm
Walther, L. (2012). Principles of
Accounting. Chapter 1. Retrieved from http://www.principlesofaccounting.com/
Below are two introductory videos by the
author of Principles of Accounting (2011). Note that there are five videos
associated with Chapter One in Dr. Walther's textbook. They are all useful, so
feel free to watch them all. Readings from this textbook will be assigned for
future modules and each chapter has at least one video associated with it.
Walther, L. (2010, March 5). Financial and
Managerial Accounting Information, Chapter 1 [Video file] Retrieved from the
playlist at http://www.youtube.com/user/larrywalther/videos?view=pl
Walther, L. (2010, March 6). The Four Core
Financial Statements, Chapter 1 [Video file] Retrieved from the playlist
at
http://www.youtube.com/user/larrywalther/videos?view=pl
Walther, L. (2010). Financial Statement
Analysis. Chapter Sixteen. Retrieved from http://www.principlesofaccounting.com/
Module 1 - Case
Introduction to Financial Accounting
Assignment Overview
General Mills
http://www.generalmills.com
Meiji Holdings Co., Ltd.
http://www.meiji.com/english/corporate/data/group/
Required:
Go to each company’s website, review the
most recent financial statements for the company, and then answer the following
questions.
•What accounting standards are used?
•What auditing standards are used by the
external auditors?
•Analyze and comment on the differences in
the annual statements found on the companies' websites. Provide a few specific
differences in content and format.
•Explain and illustrate the difference
between an annual report, a 10-K, and a Corporate Social Responsibility Report.
Comment on the type of reports issued by both companies.
•How comparable are these financial
statements?
Prepare a table for a period of three years
showing some key financial information for the two companies. Include at least
four items from the balance sheet, four items from the income statement, and
four items from the statement of cash flow. Having reviewed and analyzed the
financial information, please elaborate on the following three questions:
1.Which one of the two companies is the
most profitable?
2.Compare growth of revenues vs. income
over time and between the two companies.
3.How can you explain the difference in
profitability between the two companies?
4.Indicate in detail the information you
used to answer the above questions.
Assignment Expectations
It is important to answer the questions as
posed. The discussion should be 4 to 6 pages and written in a clear and concise
manner. Support your discussion with references in APA format. You are
encouraged to use Excel or other compatible spreadsheet software when
computations are involved.
Upload your completed assignment.
Module 1 - SLP
Introduction to Financial Accounting
Costa Company
In the first Case you had the opportunity
to review the financial statements of two companies and make some comparisons.
This course is not about preparing financial statements, but some practice
helps explain the concepts and solidify the understanding of basic concepts. As
part of this first SLP, you will have the opportunity to acquire some hands-on
experience by creating a simple income statement and balance sheet. You will
use the information provided below for Costa Company for this application.
Future SLP applications will be based on the company of your choice.
Below find a working trial balance for
Costa Company. This format is often used during the preparation phase of the
financial statements since it provides a good overview. The Module 2 Background
information has a very simple example, which may be helpful.
Costa Company
31-Dec-14
Trial Balance (accounts in alphabetical
order)
Accounts
Working Trial Balance
Balance Sheet
Income Statement
Debit
Credit
Debit
Credit
Debit
Credit
Accounts payable
$14,500
$14,500
Accounts receivable
$18,000
$18,000
Cash
41,500
41,500
Common stock
10,000
10,000
Depreciation expense
18,250
18,250
Cost of goods sold
402,610
402,610
Equipment (net of depreciation)
325,000
325,000
Insurance
1,500
1,500
Inventory
80,500
80,500
Long-term debt
105,000
105,000
Marketing
5,600
5,600
Misc. expenses
4,500
4,500
Paid-in capital
90,000
90,000
Property taxes
6,500
6,500
Rent
22,000
22,000
Retained earnings
156,400
245,500
Revenues
619,400
619,400
Salaries
61,940
61,940
Utilities
7,400
7,400
Total
$995,300
$995,300
$465,000
$465,000
$530,300
$619,400
Net
Income $89,100
Required:
Your task is to prepare an income statement
and a balance sheet in good format after adjusting for the two errors below.
•A physical count of inventory indicates
$84,200 on hand.
•There’s a check for $15,000 from a
customer that has not been recorded in the working trial balance. The sale was
never recorded in the first place, so the transaction relating to this sale is
missing.
In addition:
1.Describe the effect of the errors on the
income statement and balance sheet.
2.Is this company profitable? How do you
determine whether or not this is the case?
3.Is the company in a solid financial
position? (Comment on balance sheet.)
Support your conclusion with information
from the financial statements.
SLP Assignment Expectations
Always include the name of the
organization(s), time period covered, and source of information. It is
important to answer the questions as posed. The document should be 2 to 4 pages
and written in a clear and concise manner. Do not forget to include tables as
required. Support your discussion or tables with references in APA format. You
are encouraged to use Excel or other compatible spreadsheet software when
computations are involved. You can turn in the spreadsheet instead of the Word
document. The content should be equivalent to the page length suggested for a
word processing document.
Module 1 - Outcomes
Introduction to Financial Accounting
•Module ◦Interpret financial statements.
•Case ◦Identify the parts of the financial
statements.
•SLP ◦Prepare a simple balance sheet and an
income statement.
•Discussion ◦Differentiate among various
standard-setting bodies.
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