Case 1
There are three main parts to this case that requires you to prepare and submit a three to five page paper. Please make sure this paper is well organized and covers all of the items below.
Part I
Search the course background information, the Internet and/or the Cyber Library. Discuss the terms listed below. Your discussion should expand on the definition as given in the module background. Explain why these concepts are important to financial statements.
Generally Accepted Accounting Principles (US GAAP);
International Accounting Standards (IFRS);
Securities and Exchange Commission (SEC);
Annual report; and
10-K, 10-Q, and 8-K
Part II
Explain the basic formats of financial statements such as income statement, balance sheet, statement of cash flows, and statement for retained earnings.
Part III
Everything in Accounting typically falls into one of three categories, as illustrated by the Accounting Equation. State the Accounting Equation: Assets = _______________ + _______________
You will note that the Accounting Equation comprises 3 “categories,” each of which can be broken down further into accounts. For each of the three main categories of the Accounting Equation, list 5 or more accounts with actual amounts that would typically be classified into each. For instance, Land & Equipment would typically be categorized as Assets.
To simplify your answers, complete the assignment using a basic table or diagram.
-Background-
Accounting is the language of business. It is important to have some understanding of accounting standards and the financial statements.
The term GAAP or generally accepted accounting principles refer to the standards promulgated by the Financial Accounting Standards Board (FASB). All US publicly held companies and other companies audited by external auditors must adhere to these standards.
The four financial statements required by US GAAP are:
The income statement
The balance sheet (or statement of financial position)
The statement of cash flow
The statement of retained earnings
The financial statements are based on the accounting equation, i.e.
Assets = Liabilities + Equity
Publicly companies must file a number of reports with the Securities and Exchange Commission (SEC) including quarterly and annual financial statements. These statements are typically released to the public and published on the corporate website. The annual report is traditionally associated with the release of financial information to the public.
The Profession
The American Institute of Certified Public Accountants (AICPA) states on its homepage (http://www.aicpa.org/Career/CareerPaths/Pages/CareerPaths.aspx) that the below specializations are available career paths to a licensed public accountant (CPA).
Forensic and Valuation Services Taxation
Fraud Prevention, Detection & Investigation
Audit
Business and Industry/New Finance
Government
Personal Financial Planning
PrimePlus/ElderCare
Employee Benefit Plan Audit
Information Technology (IT)
For further information about the CPA profession and rules for licensing go to the websites for AICPA or the National Association of State Boards of Accountancy (NASBA).
Required Materials
Baruch College, The University of New York (2008). Guide to Financial Statements. This is a 45-minute interactive video presentation with audio. It is an excellent introduction and overview of financial statements. You do not have to watch the whole presentation at one time since it is easy to restart at different points. The information is also available in a PDF file.
Benedicto, M.S. (2008) Introduction to Financial Accounting. IE Business School. A multimedia presentation. The information is also available in a PDF file. Click on “Financial Statements” tab and “Practical Example” tab. Retrieved from http://openmultimedia.ie.edu/OpenProducts/financial_accounting/financial_accounting/frames.html
Read the appropriate chapters in the following text(s):
Edwards, J.D. & Hermanson, R.H. (2007) Accounting Principles: A Business Perspective. First Global Text Edition, Volume 1. Financial Accounting, pp. 6 – 37. Retrieved from http://dl.dropbox.com/u/31779972/Accounting%20Principles%20Vol.%201.pdf
Gangwar, Sharda & Gangwar, D.K. (2009). Fundamental Principles of Accounting, Global Media (read chapters 1, 2, 4, and 10), from library portal.
Ramagopal, C. (2009). Accounting for Managers, New Age International 2009 (read chapter 11), from library portal.
Smith, Barry. (2010). Introductory Financial Accounting, Open University Press 2010 (read chapters 1, 2, 3, and 11) from library portal.
Optional Resources
drake, P. (n.d.). Financial Ratio Analysis. Retrieved from http://educ.jmu.edu/~drakepp/principles/module2/fin_rat.pdf
SEC (2007). Beginner’s Guide to Financial Statements. Retrieved from http://www.sec.gov/investor/pubs/begfinstmtguide.htm
Tutor2u (n.d.) is another website with presentations/notes that explain some basic accounting concepts. Retrieved from http://tutor2u.net/sub_accounting.asp
Before you start the case you may want to try the quiz below to test your knowledge of accounting terminology. It is not graded and the answers are available.
Learn Accounting for Free. Accounting Basics Quiz | AccountingCoach.com, Retrieved from http://www.accountingcoach.com/online-accounting-course/60Dpg01.html
Understanding financial statements, Retrieved from: http://www.bizzer.com/images/Financial/
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