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Accounting and Financial Statements (Financial Statements (income…
Accounting and Financial Statements
Accounting
is the
recording, measurement,
and interpretation of
financial information
Accountants are the
people who prepare
accounting information
Public Accountants
Certified public accountants (CPAs)
Private Accountants
certified management accountants
The Accounting Process
Double-entry bookkeeping
Accounting cycle
Step One: Examine Source Documents
Step Two: Record Transactions
Step Three: Post Transactions
Step Four: Prepare Financial Statements
Accounting Equation
Assets
Accounting equation
Assets = Liabilities + Owners’ equity
Owners’ equity
Liabilities
Internal Uses
Managerial accounting
Cash flow
budget
External Uses
annual report
Financial Statements
income statement
Revenue
Cost of goods sold
Gross income or profit
Expenses
Net income
Temporary Nature of Income Statement Accounts
balance sheet
Assets
Current assets
Accounts receivable
Liabilities
Current (short-term) liabilities
Accounts payable
Accrued expense
The statement of cash flows
Ratio Analysis: Analyzing Financial Statements
Ratio analysis
Profitability ratios
Profit margin
Return on assets
Return on equity
Asset utilization ratios
Receivables turnover
Inventory turnover
Total asset turnover
Liquidity ratios
Current ratio
Quick ratio (acid test)
Debt utilization ratios
Debt to total assets ratio
Times interest earned ratio
Per share data
Earnings per share
Dividends per share
Industry Analysis