Chapter 4: Financial reporting and analysis

Monday, February 27, 2012 11:24 PM

(ability to pay dividends, interest) (good management ) 1 and only 1 accounting procedure. If change, disclose in note to the financial statement Is material if only it influences the decisions of users of financial statement. 5% of net income is material Choose the one that is least likely to overstate assets and income

Transparent

Benefits gained from providing information greater than the costs

Information faithfully represents

Accounting Page 1

(within operating cycle)

Marketable securities

(not convert to cash within next year)

(also include natural resources)

(also include bonds payable)

Storing goods and prepare for sale: displaying , advertisings, delivery; sale salaries expense; commissions expense

Multistep income statement Net sales (Cost of goods sold) Gross margin (operating expense) Income from operations other revenues and expenses Income before taxes expense (income taxes) Net income Earnings per share = net income/shares

(dividend income)

Accounting expense, personnel, credit checking, collections

Accounting Page 2

Multistep income statement Net sales (Cost of goods sold) Gross margin (operating expense) Income from operations other revenues and expenses Income before taxes expense (income taxes) Net income Earnings per share = net income/shares

(dividend income)

Accounting expense, personnel, credit checking, collections

Single step income statement

Revenue (cost and expenses) Income before income taxes (Income taxes) Net income Earnings per share

Financial ratios (%)

Times Lower costs, higher gross margin

(higher asset turnover preferable)

times

Notes for midterm (p198) definitions and understanding clearly 1 matching definition in this chpt (p204) not prepare financial statement ----> calculate ratio from information Create a card (no larger than 5 x 7) all the ratio equations ONLY (as many as u want) Classified income statement: wat in categories

Accounting Page 3