Scarica financial accounting international financial reporting standards e più Schemi e mappe concettuali in PDF di Cost Accounting solo su Docsity! CHAPTER 1 P1-55A, P1-56A, P1-57A, P1-58A, P1-59A, P1-61A proprietorship: single owner(proprietor) – personally liable partnership: 2+ parties as co-owner -general parties: liable, liable parties: non liable corporation: shareholders not personally liable USER OF FINANCIAL REPORT - Investor - Employs - Creditors - Suppliers - Govern - Public FUNDAMENTAL CHARACTERISTICS 1) Relevance 2) Faithful representation 3) Comparability 4) Verifiability 5) Timeliness 6) Understandability 1 income statement —> statement of changes in equity —> balance sheet —> statement of cash flow 1) INCOME STATEMENT Total income Total expences ______________ NET INCOME 2) STATEMENT OF CHANCES IN EQUITY Balance n-1 Issuance of shares NET INCOME of the year Other equity movements ___________________________ Balance 3) STATEMENT OF CASH FLOW 4) BALANCE SHEET assets Cash and cash equivalent All other assets _______________ Total assets CHAPTER 2 P2-61A, P2-63A, P2-65A FINANCIAL STATEMENT Assets Cash Account receivables Notes receivables Inventory Prepaid expences PPE (property, plant, equipment) Liabilities Account payable Notes payables Accrued liabilities Equity Share capital Retained earnings dividends Issued share capital 50’000 Cash Share capital 2 X X Such accounting changes make it difficult to compare one period with preceding periods. Without detailed information, investors can be misled into thinking that the current year is better or worse than the preceding year, when in fact the only difference is a change in accounting method. Thus, for these changes, the entity would report figures for all periods presented in the Income Statement, past as well as current, on the new basis. The company retrospectively applies (looks back and reapplies) all prior-period amounts that are presented for comparative purposes with the current year, as though the new accounting method had been in effect all along. This lets investors compare all periods that are presented on the same accounting basis. You would expect financial statements to contain no factual errors. However, sometimes errors are only discovered after the financial statements have been issued. How do you deal with these errors? prior-period errors, which may be caused by omissions from, and misstatements in, the entity's financial statements for one or more prior- periods arising from a failure to use, or misuse of, reliable information. These errors include the effects of arith- metic mistakes. All material prior-period errors require retrospective restatement, either by restating the opening balances of assets, liabilities, and equity for the earliest prior-period presented in a set of financial statements, or, if impractical, through a "prior-period adjustment" to the beginning retained earnings in the statement of changes in equity. EVALUATE A COMPANY’S SHORT TERM LIQUIDITY introducing financial ratios Let's start with current ratio, which helps investors measure the short-term liquidity of a company. Current Ratio One of the most widely used financial ratios, which divides total current assets by total current liabilities, taken from the Balance Sheet. Current ratio: Totalcurrent assets Totalcurrent liabilities Current ratio BASF 2015 BASF 2014 current assets current liabilities 24 ' 566 14 ' 236 =1.73 27 ' 420 15 ' 893 =1.73 The current ratio measures the company's ability to pay current liabilities with current assets. A company prefers a high current ratio, which means that the business has plenty of current assets to pay current liabilities. An increasing current ratio from period to period indicates improvement in financial position. 5 6
