Professional Documents
Culture Documents
Introduction to
Financial Statements and
Other Financial
Reporting Topics
Chapter 2, Slide #2
Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved.
Statement of Owners’ Equity
Chapter 2, Slide #5
Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved.
Notes
Chapter 2, Slide #6
Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved.
The Accounting Cycle
1. Recording transactions
2. Recording adjusting entries
3. Preparing the financial statement
Chapter 2, Slide #7
Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved.
Recording Transactions
Chapter 2, Slide #8
Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved.
Effects of Debits and Credits on Accounts
Chapter 2, Slide #9
Copyright 2007 by Thomson South-Western, a part of The Thomson Corporation. All rights reserved.
Accounting System Components
Permanent Temporary
Account Assets Revenues, Gains
types Liabilities Expenses, Losses
Equity Dividends
Balances Carry forward to Closed to retained
the next fiscal earnings at year-end
period
Start with $0 balance
in the next period
• Paragraph #1:
– Financial statements have been audited
– Financial statements are responsibility of
management
– Auditors have responsibility to express or disclaim
an opinion
• Paragraph #2
– Audit conducted in accordance with the standards
of the (U.S.) Public Accounting Oversight Board
– Auditor is required to plan and perform the audit
• Obtain reasonable assurance
• Financial statements are free from material
misstatement
– Audit provides a reasonable basis for opinion
• Examining evidence
• Assessing accounting principles and estimates
• Paragraph #3
– Opinion: in conformity with generally accepted
(U.S.) accounting principles
• Also: for public companies, reference to the
audit of internal control effectiveness
– In accordance with the the (U.S.) Public
Accounting Oversight Board
– Based on criteria established by COSO
• Required by Sarbanes-Oxley
• May be combined with audit opinion report
• Paragraphs
1. Scope
2. Responsibility and procedures
3. Opinion
4. Reference to financial statement audit
Required filings
– 10-K: annual filing (audited)
• Includes financial statements plus
– Information on the business entity
– Market information
– Management discussion and analysis
– Directors, executive officers, and their compensation
– Related party transactions
– 10-Q: quarterly filing (unaudited)
– 8-K: “current report”
• To report the occurrence of any material events or corporate
changes
• Proxy
– Notice and authorization of shareholder voting
rights on corporate actions
– Content and form governed by the SEC
• Summary Annual Report
– Highly condensed financial information
– Must be accompanied by a proxy containing full
financial information
– Not adequate for financial analysis