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Lecture Principles of accounting (2005): Chapter 6 - Needles, Powers, Crosson

Chapter 6 - Financial reporting and analysis. This chapter introduces the objectives and qualitative aspects of financial information. It demonstrates how much more useful classified financial statements are than simple financial statements in presenting information to statement users. This chapter also includes an introduction to financial statement analysis. | Financial Reporting and Analysis Multimedia Slides by: Gail A. Mestas, MAcc, New Mexico State University Chapter 6 6– Learning Objectives State the objectives of financial reporting. State the qualitative characteristics of accounting information and describe their interrelationships. Define and describe the conventions of comparability and consistency, materiality, conservatism, full disclosure, and cost-benefit. 6– Learning Objectives (cont’d) Explain management’s responsibility for ethical financial reporting and define fraudulent financial reporting. Identify and describe the basic components of a classified balance sheet. Prepare multistep and single-step classified income statements. Evaluate liquidity and profitability using classified financial statements. 6– Objectives of Financial Accounting Objective 1 State the objectives of financial reporting 6– Purpose of Financial Accounting To provide financial information about a company, particularly its ability to . | Financial Reporting and Analysis Multimedia Slides by: Gail A. Mestas, MAcc, New Mexico State University Chapter 6 6– Learning Objectives State the objectives of financial reporting. State the qualitative characteristics of accounting information and describe their interrelationships. Define and describe the conventions of comparability and consistency, materiality, conservatism, full disclosure, and cost-benefit. 6– Learning Objectives (cont’d) Explain management’s responsibility for ethical financial reporting and define fraudulent financial reporting. Identify and describe the basic components of a classified balance sheet. Prepare multistep and single-step classified income statements. Evaluate liquidity and profitability using classified financial statements. 6– Objectives of Financial Accounting Objective 1 State the objectives of financial reporting 6– Purpose of Financial Accounting To provide financial information about a company, particularly its ability to generate adequate cash flows Interested parties include Investors Interested in returns from dividends and the market price of their investment Creditors Interested in a company’s ability to repay debt 6– Objectives of Financial Information The Financial Accounting Standards Board (FASB) has developed three objectives of financial reporting These objectives are based on the information needs of users and the general business environment 6– Objectives of Financial Information To furnish information that is useful in making investment and credit decisions Information that can help present and potential investors and creditors make rational investment and credit decisions To provide information useful in assessing cash flow prospects Information to help users judge the amounts, timing, and risk of expected cash receipts from dividends or interest and the proceeds from the sale, redemption, or maturity of stocks and loans To provide information about business resources, claims to .