Overview And The Beginning Of Financial Statement Analyses
Managerial Accounting Overview and the Beginning of Financial Statement Analyses
By the end of this lesson, students should be able to:
- State and understand the definition of accounting
- Identify and describe different classifications of accounting
- Understand the variety of professional services that accountants provide.
- Understand what transactions are
- Understand the four principal financial statements and their basic forms
- Define and manipulate the accounting equation
- Understand the terminology associated with financial statements
- Explain why financial statements are included in the corporation annual report
- Define current assets and give examples
- Understand how short-term marketable securities are reported on the balance sheet
- Name and use alternative cost-flow assumptions
- Define prepaid expenses and understand how they are reported on the balance sheet
- Determine how the cost of land, buildings, & equipment is reported on the balance sheet
- Define the terms capitalize and expense with respect to property, plant, and equipment
- Use alternative methods to calculate depreciation
- Understand how deprecation for income tax purposes differs from financial accounting depreciation
This course deals with two facets of accounting: Financial Accounting and Managerial Accounting. Lessons 1, 2, and 3 focus on Financial Accounting. Lessons 4, 5, and 6 focus on Managerial Accounting.
Accounting is the process of identifying, measuring, and communicating economic information about an entity for the purpose of making decisions and informed judgments (Chapter 1). Financial accounting standards are not a “fixed code of rules,” but are established in response to user needs and business developments. Accountants need to apply professional judgment in the application of accounting principles. Ethical practices are imperative in the role of the accounting profession.
Chapter 2 is a key chapter of the text. The material presented in it becomes a foundation for all subsequent financial accounting topics. A significant amount of time should be spent studying the purpose and content of the following account categories: asset, liability, owners’ equity, revenue, and expense associated with each financial statement and how they all tie together.
The components on the left side of the accounting equation (assets) are examined in Lesson 1. Assets are things of value to a firm. Chapter 5 details the current asset portion of the accounting equation and introduces inventory cost-flow assumptions. Chapter 6 details non-current assets. Lesson 2 covers the right side of the accounting equation (liabilities and owner’s equity) in detail.