Premium Essay

Working with Financial Statements Ac300

In: Business and Management

Submitted By deewood12
Words 388
Pages 2
Working With Financial Statements

ACC 300
April 06, 2015

Working With Financial Statements
Introduction –

Revenue Recognition Principle -
Explain revenue recognition principle

Expense Recognition Principle -
It is to be expected that in accounting there are principles to follow, just as they are in other various fields regarding finances. An example of this is banking where allocations and limitations are set. According to the principle of expense recognition revenue reflects in earning periods. Our expression as consumers is to enter into an agreement that has something to offer both parties. As the seller I am choosing the price, and the buyer agrees to listed price. The transaction has informed an agreement that is recognized through assurance. (Boundless Accounting)
To recognize expenses, revenue is regarded and allies to the balance sheet. For example as the owner of a good I have fixed costs, and production cost that are in place whether I sell the goods or not. In lieu of the expenses recognition, we must meet the matching principle to move up own our balance sheet. An income statement shows these transactions due to the fact we are forced to record revenue and expenses, specifically those relating in cash. Costs are to broad to list all of them in an essay forum. However the two main categories are product costs and period costs. What are these? Period costs are things such as payroll, admin related expenses, and benefits solutions. In most cases these are documented when they take place. Product costs are things such as material, contract labor, utilities and or overhead expenses. These costs are all in support of creating the product in its manufacturing stage. There is a growing concern that the matching principle allures deferment and non-reporting of essential entries. Answering these areas are better left to the auditors to…...

Similar Documents

Premium Essay

Financial Statements

...Financial statements Brandywine Homecare, a not-for-profit business, had revenues of $12 million in 2007. Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was $1.5 million. All revenues were collected in cash during the year and all expenses other than depreciation were paid in cash. a. Construct Brandywine’s 2007 income statement. An income statement is summarized events of financial operations or activities of an organization, which focuses on its revenues, expenses, and profitability over a period of time. It is worth noting that financial statement summarizes economic events and status of an organization—income statement is the one of the three financial statements (Gapenski, 2008). Brandywine’s 2007 Income Statement Revenue: $12,000,000 Expenses: Depreciation $ 1,500,000 Other $ 9,000,000 Total expenses $10,500,000 According to Gapenski (2008), when revenue exceeds expenses, the result is a profit, and if expenses exceed revenues, the result is a loss. Other than depreciation, the revenues and expenses were collected and paid in cash—Brandywine Homecare uses the cash basis accounting method. b. What were Brandywine’s net income, total profit margin, and cash flow? The net income is the total earning of a company. It is calculated by Revenue minus Expense equal Net income......

Words: 958 - Pages: 4

Premium Essay

Financial Statement

...Dorothy McAleer Financial statement Final Assignment 1. After visiting the Securities and Exchange Commission’s website (www.sec.gov) to obtain a copy of a recent Forms 10-K, 10-Q and 8-K filed by a publicly held company with stock actively traded on the New York or NASDAQ, Include the following information in your group presentation: a. What is the company's industry? Burger King is a fast food company from the United States. Today, this company is implemented all over the world and it is one of the most famous fast food companies all over the world. Often abbreviate as being BK, its headquarters are located in Florida, United States of America. By developing the first Burger King, James McLamore and David Edgerton the two creators had given the community a comfortable environment to eat inside of the restaurant, because the restaurant was the first fast food business to offer people the option of dining in the restaurant or going to the drive. With McDonalds being the largest fast food chain in the world, Burger King rates as the second largest hamburger fast food restaurant in the world, with Wendy’s following right behind it One of their goals is that they try hard to continuously increase their image and product line. Having integrity, diversity, fairness, team work, and commitment to excellence are only some of this fast food restaurants values. With Burger King’s unique values and slogan they have created a position for themselves that......

Words: 2149 - Pages: 9

Premium Essay

Financial Statement

...and 149 to 150. The auditable part of the Directors' Remuneration report as set out on page 68 has also been audited. The maintenance and integrity of the Unilever website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters. Accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially placed on the website. Legislation in the United Kingdom and the Netherlands governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Disclaimer Except where you are a shareholder, this material is provided for information purposes only and is not, in particular, intended to confer any legal rights on you. The Annual Report & Accounts and Form 20-F does not constitute an invitation to invest in Unilever shares. Any decisions you make in reliance on this information are solely your responsibility. The information is given as of the dates specified, is not updated, and any forward-looking statements are made subject to the reservations specified on page 3 of the Report. Unilever accepts no responsibility for any information on other websites that may be accessed from this site by hyperlinks. Notes to the consolidated accounts Unilever Group 21 Called up share capital Number of shares authorised € million Authorised 2003 € million Authorised 2002 Nominal value per share €......

Words: 23509 - Pages: 95

Premium Essay

Financial Statements

...Application of Financial Statement Strayer University A balance sheet is a financial statement that reports the assets, liabilities, and stockholder’s equity at a specific point in time. The balance sheet is like a snapshot of the financial condition of a company. The asset section lists everything that the company owns, such as cash, inventory, accounts receivable, and long-term assets such as property, land or equipment. The asset section helps analysts, investors, and creditors understand what a business owns and what their objectives are. The liability section of the balance sheet reports what a company owes, such as debts or loans. Liabilities are divided into two separate sections, current and long-term liabilities. Current liabilities are financial obligations that are to be paid within the coming year such as accounts payable and short-term loans. Long-term liabilities are obligations that the company expects to pay after one year such as bonds payable and mortgage payable. In understanding the assets and liabilities sections of the balance sheet, the manager can evaluate the relationship between the current assets and current liabilities. These relationships can be expressed in ratios such as the current ratio and working capital. The current ratio is calculated by dividing the current assets by the current liabilities. Working capital is calculated by subtracting the current liabilities from the current assets. The amount of working capital is an indicator of......

Words: 730 - Pages: 3

Premium Essay

Financial Statements

...called a financial statement. The financial statement lets the person and business know what debits have been taken place in a monthly and yearly time and also credits that have been done in a monthly ans yearly time. There are four types of a financial statement and that is a balance sheet, a profit and loss statement, a statement of a change in equity, and a statement of cash flow. These four types of a financial statement have their own purpose in the accounting field and they are all very important to the businesses and individual people that use each of them. The balance sheet lets the businesses and people that use this sheet know what assets, liabilities, and ownership equity at anytime they need it, monthly, quarterly, or yearly. The balance sheet is also a summary of a sole proprietorship, business partnership, and other business organizations, if companies and businesses need them depending on if there is an audit of the company or needing them for month end or yearly end purposes. A balance sheet usually has assets in one section of the statement and liabilities and net worth in the other section. There are two types of a balance sheet and that is an account form and a report form. The balance sheet for personal use has current assets such as cash flow whether is would be in the checking account and or in a savings account or liabilities such as mortgages, and other debits that go through the account. The profit and loss part of the financial statement......

Words: 1060 - Pages: 5

Premium Essay

Financial Statements

...Checkpoint: Financial Statements Christine Jennings XACC/290 Pamela Zanzucchi January 17, 2013 The four basic financial statements are the income statement, retained earnings statement, balance sheets and statements of cash flow. The information that these reports provide to employees, managers, and investors can range from a large group of information such as, if a company is financially able to fund the company operations and pay their debts on time. These reports can also tell a company’s predicted future earnings. Each of these reports are as important as another because they work together to show employees and investors different financial parts of a company. An income statement keeps track of a certain period of time in order to monitor the successes and failures of a company. If a company has a significant amount of failures the company will be able to know why they experienced these failures because of these financial statements. The retained earnings statement also keeps track of a certain time period to track the amounts and different variations in retained earnings. The statement of cash flow provides financial statistics on the cash receipts and disbursements of the company. This will allow the company to be able to determine if they can cover the daily or monthly cost of operations with the amount of money on hand. When a company compiles all the information from these other financial statements, they will create the balance sheet. All of these......

Words: 527 - Pages: 3

Premium Essay

Financial Statement

...Consideration of Fraud in a Financial Statement Audit 1719 AU Section 316 Consideration of Fraud in a Financial Statement Audit (Supersedes SAS No. 82.) Source: SAS No. 99; SAS No. 113. Effective for audits of financial statements for periods beginning on or after December 15, 2002, unless otherwise indicated. Introduction and Overview .01 Section 110, Responsibilities and Functions of the Independent Auditor, paragraph .02, states, "The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. [footnote omitted]"1 This section establishes standards and provides guidance to auditors in fulfilling that responsibility, as it relates to fraud, in an audit of financial statements conducted in accordance with generally accepted auditing standards (GAAS).2 .02 The following is an overview of the organization and content of this section: • • • Description and characteristics of fraud. This section describes fraud and its characteristics. (See paragraphs .05 through .12.) The importance of exercising professional skepticism. This section discusses the need for auditors to exercise professional skepticism when considering the possibility that a material misstatement due to fraud could be present. (See paragraph .13.) Discussion among engagement personnel regarding the risks of material misstatement due to fraud. This section......

Words: 25387 - Pages: 102

Premium Essay

Financial Statement

...prudent in their borrowing activities to avoid excessive risk and the possibility of financial distress or even bankruptcy. A firm's debt-to-equity ratio also impacts the firm's borrowing costs and its value to shareholders. The debt-to-equity ratio is a measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. The target (optimal) capital structure is simply defined as the mix of debt, preferred stock and common equity that will optimize the company's stock price. As a company raises new capital it will focus on maintaining this target (optimal) capital structure. Table of Contents 1. Introduction 2. Capital Structure Clarifying Capital Structure-Related Terminology Capital Ratios and Indicators Additional Evaluative Debt-Equity Considerations Factors That Influence a Company's Capital-Structure Decision 1 2 2 3 3 4 3. Cement Industry of Bangladesh Industry Overview Existing Industry Structure Market for Cement Industry Future Prospect Market Share 5 6 6 6 7 7 4. Lafarge Surma Cement Limited Company Overview Basic Information Interim Financial Performance: 2012 Shareholders & Investors Composition of the......

Words: 4834 - Pages: 20

Premium Essay

Financial Statements

...Katrina Baron Financial Statements The four basic financial statements are the balance sheet, income statement, statement of cash flow, and the statement of retained earnings. The balance sheet depicts the current financial circumstances of the company. This reports the company’s assets, liabilities, and net equity as of a given point in time. The income statement reports the company’s cost and revenues. This reports the company’s income, expenses, and profits over a period of time. The statement of cash flow describes the changes is cash and cash equivalents. This reports the company’s activities, such as its operating, investing, and financing costs. The statement of retained earnings reports the changes in equity. Basically this explains the company’s retained earnings over the reporting period. The internal users would be managers and employees that use the financial statements. They would use the financial statements to obtain the data to use for any future budget concerns. The internal users can use the data to set performance goals for the company. They can also use the data to see where the company needs to increase revenue from a certain department in the company. Along with being able to see where they need to make cutbacks. The internal users rely on the financial statement to direct the company in all its daily activities. The external users for the financial statement would be investors and creditors. The data obtained from the financial statement would be......

Words: 326 - Pages: 2

Premium Essay

Financial Statement

... | Financial Structure is the framework of various types of financing employed by a Oil company to acquire and support resources necessary for its operations, commonly, it comprises of stockholders’ investments, long- term loans, short-term loans and short-term liabilities as reflected on the right hand side of the Oil company balance sheet. Financial Structure is different from capital structure in the sense that it also includes current liabilities. Therefore, financial structure is the combination of two main components 1) Capital structure and 2) Current liabilities. To provide an understanding of the concept of financial structure in Oil sector specifically capital structure of Padma Oil Company Limited, the balance sheet, debt and equity, working capital, cost of capital and opportunity cost are need to be explained. The capital structure is how an Oil company finances its overall operations and growth by using different sources of funds. It is a mix of a company’s long-term debt, specific short-term debt, common equity and preferred equity. Debt comes in the form of bond issues or long-term notes payable, while equity is classified as common stock, preferred stock or retained earnings. Short-term debt such as working capital requirements is also considered part of the capital structure. Working capital is defined as the difference between current assets and current liabilities.......

Words: 10980 - Pages: 44

Premium Essay

Financial Statement

...Understanding Assets University of Phoenix Making sound business decisions and properly portraying a company to investors involves understanding working capital and assets. The lower of cost or market value can shape critical business decisions that need to be made. Understanding how to capitalize interest properly during a construction project can save money. When putting an asset to rest its important to portray accurately the loss or gain. When thinking about expanding by acquiring an existing business it is important to know how to adjust goodwill for impairment. Lower of Cost or Market Value A requirement of U.S. GAAP is that inventory is recorded at the lower of cost to produce it, repurchase it or the market value of the inventory (Investopedia, 2009). This principle affects the balance sheet and can affect the income statement. Here is an example of how this principle can play out. Assume it is December 2009 and retail store A has 20 basketballs in inventory. The basketballs were purchased from Spalding at a cost of $20 each and the plan is to sell them at a retail price of $70, a price that is in line with the competition. On December 31, Spalding announces a permanent price reduction – the basketballs can now be purchased for $5 instead of $20. Retail store A expects the competition to buy up the reduced basketballs and pass the savings on to customers, by advertising a price reduction. The competition plans to sell the basketballs......

Words: 1276 - Pages: 6

Premium Essay

Financial Statements

...Finnlines Plc FINANCIAL STATEMENTS 2013 CONTENTS BOARD OF DIRECTORS’ REPORT ................................................................................................................................ 4 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, IFRS ...................................................................... 9 CONSOLIDATED STATEMENT OF FINANCIAL POSITION, IFRS ............................................................................. 10 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY, IFRS .............................................................................. 11 CONSOLIDATED STATEMENT OF CASH FLOWS, IFRS ........................................................................................... 13 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.................................................................................. 14 1. CORPORATE INFORMATION ........................................................................................................................ 14 2. ACCOUNTING PRINCIPLES ........................................................................................................................... 14 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS ............................................................................. 14 IMPLEMENTATION OF STANDARDS ....................................................................................................................... 14 ADOPTION OF NEW AND AMENDED......

Words: 31417 - Pages: 126

Premium Essay

Financial Statements

...There are four main financial statements. They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders’ equity. Balance sheets show what a company owns and what it owes at a fixed point in time. Income statements show how much money a company made and spent over a period of time. Cash flow statements show the exchange of money between a company and the outside world also over a period of time. The fourth financial statement, called a “statement of shareholders’ equity,” shows changes in the interests of the company’s shareholders over time. Let’s look at each of the first three financial statements in more detail. Balance Sheets A balance sheet provides detailed information about a company’s assets, liabilities and shareholders’ equity. Assets are things that a company owns that have value. This typically means they can either be sold or used by the company to make products or provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. It also includes things that can’t be touched but nevertheless exist and have value, such as trademarks and patents. And cash itself is an asset. So are investments a company makes. Liabilities are amounts of money that a company owes to others. This can include all kinds of obligations, like money borrowed from a bank to launch a new product, rent for use of a building, money owed to suppliers for materials, payroll a company...

Words: 2913 - Pages: 12

Premium Essay

Financial Statements

...Financial Statements Financial information is the heart of business management. Businesses report information in the form of financial statements on a periodic basis. The most common financial statements are the Consolidated Statement of Earnings (income statement), balance sheet and statement of cash flows. Each of these financial statements are important to a business for a different reason. Today, we will look at these financial statements, examine the importance and show what business decisions can be made from each statement. In addition, we will look at these financial statements for Home Depot and see what their financial statement say about the company’s financial state. Consolidated Statement of Earnings The Consolidated Statement of Earnings, the income statement, reveals the profit or loss of a company as well as other crucial numbers that investors and creditors will look for. For the Home Depot, their income statement shows that from 2007 to 2009, profit was earned each year. However, profit decreased each year. The decrease in profit is directly related to the decrease of net sales. Home Depot’s expenses decreases along with sales and therefore, they were still able to show a profit. Their net sales decreased significantly from 2008 to 2009, while their cost of sales did not change significantly. The income statement is important because it shows the profitability of a company during the time interval specified in its...

Words: 999 - Pages: 4

Premium Essay

Working with Financial Statements

...Working with Financial Statements   Accounting concepts are numerous in amount. They set the ground rules to follow in preparing accounts and financial statements. Financial statements provide knowledge of the financial health of companies. Learning about the different financial statements and their uses is important to understand how a company is competing in its market and if the company is successful. Through financial statements investors, creditors, and managers can analyze the health, risks, and profits. Two principles come into play when discussing financial statements and what information is applicable during certain periods. Those principles are revenue recognition principle and expense recognition principle. After discovering which transactions are applicable the information is input in the financial statements. Then the applicable information is written in a journal with explanations. Sometimes changes occur and when this happens one needs to understand the situations requiring adjustment journal entries. The revenue recognition principle requires the company to only recognize earned revenue in the accounting period. This principle falls under generally accepted accounting principles or GAAP. The principle applies to companies depending on the type of accounting base they use. Under accrual-basis accounting, for example a delivery service company completes deliveries for a shipment company the entire month of July for a fee of $500. The company should......

Words: 356 - Pages: 2