Professional Documents
Culture Documents
Accounting: Prof: Jim Wallace TA: Golf
Accounting: Prof: Jim Wallace TA: Golf
Administrative stuff
What is financial accounting?
Some Myths
Financial statements
GAAP
Auditing
Administrative Stuff
Who am I
Who is your T.A.
Teaching philosophy
Syllabus
Homework
Calculator
Web Access to Class Info
http://www.cgu.edu/pages/3472.asp
What is Financial
Accounting?
A method to communicate financial
information to interested external parties.
Users include capital providers,
regulators, customers, suppliers,
employees, etc
• Capital suppliers include debt and equity
providers
Financial accounting is used for both
prediction and control
Accounting is rigid and
yields the truth
Generally-accepted accounting principles, or
GAAP, are a set of rigid rules that, if followed
correctly, will lead to a unique, “correct”
representation of the financial performance
and health of a firm.
Accounting is useless.
Accounting is hard!
Managerial
Non-profit
Tax
Accrual Accounting
Accrual accounting rests on two guiding
principles:
Revenue Recognition Principle – record
revenue when
Earned
Realized or Realizable
Matching Principle – record expenses when
Incurred
Neither the recognition of revenue nor the
recording of expense necessarily involves the
receipt or payment of cash
How do you define a rich
person?
Has a lot of valuable stuff (worth more
than what is owed).
Makes a lot of money
The Financial Statements
The accounting equation
Balance Sheet
Income Statement
1. Be owned or controlled by
the company
2. Must possess expected
future benefits
Most Assets are Reported at
Historical Cost
Historical Cost is
Objective
Verifiable
Therefore, not subject to bias
Baron Coburg
Oversight of Financial
Accounting
GAAP
Oversight of Financial Accounting
SEC oversees all publicly traded
companies
Financial Accounting Standards
Board (FASB)
Generally Accepted Accounting
Principles (GAAP)
Basic Assumptions and
Principles
Monetary Unit
Fiscal period
Going concern
Objectivity (Reliability)
Consistency
Versus comparability
Question?
Financial statements must contain
objective and verifiable numbers if
they are to be useful. Yet, many
estimates and subjective assumptions
are required for the preparation of
these reports. Please reconcile these
apparently inconsistent statements.
Exception to the
Basic Principles
Materiality
Only transactions with amounts large
enough to make a difference are
considered material
Non-material transactions can be
treated in the easiest manner
Information Beyond Financial
Statements
Management Discussion and
Analysis (MD&A)
Independent Auditor Report
See textbook