完整word版财务报表分析英文版Word文档下载推荐.docx

1、s financial condition. The income statement: reports on the performance of the firm. The statement of cash flows: reports the cash receipts and cash outflows classified according to operating, investment and financing activities. The statement of stockholders equity: reports the amounts and sources

2、of changes in equity from transactions with owners. The footnotes of the financial statements: allow uses to improve assessment of the amount, timing and uncertainty of the estimates reported in the financial statements.The most accurate way to measure the results of enterprise activity would be to

3、measure them at the time of the enterprises eventual liquidation. Business, government, investors, and various other user groups, however, cannot wait indefinitely for such information. If accountants did not provide financial information periodically, someone else would.The periodicity or time peri

4、od assumption simply implies that the economic activities of an enterprise can be divided into artificial time periods. These time periods vary, but the most common are monthly, quarterly, and yearly.The information must be reliable and relevant. This requires that information must be consistent and

5、 comparable over time and also be provided on a timely basis. The shorter the time period, the more difficult it becomes to determine the proper net income for the period. A months results are usually less reliable than a quarters results, and a quarters results are likely to be less reliable than a

6、 years results. Investors desire and demand that information be quickly processed and disseminated; yet the quicker the information is released, the more it is subject to error. This phenomenon provides an interesting example of the trade-off between relevance and reliability in preparing financial

7、data.In practice, financial reporting is done at the end of the accounting period. Accounting periods can be any length in time. Firms typically use the year as the primary accounting period. The 12-month accounting period is referred to as the fiscal year. Firms also report for periods less than a

8、year （e.g. quarterly） on an interim basis. Accounting period must be of equal length. Financial statements are prepared at the end of the regular accounting period to allow comparison across time. b. explain why the accounts must be adjusted at the end of each period. Why?Most external transactions

9、are recorded when they occur. The employment of an accrual system means that numerous adjustments are necessary before financial statements are prepared because certain accounts are not accurately stated. Some external transactions might not even seem like transactions and are recognized only at the

10、 end of the accounting period. Examples include unrecorded revenues and credit purchase. Some economic activities do not occur as the result of external transactions. Examples include depreciation and the expiration of prepaid expenses. Timing: Often a transaction affects the revenue or expenses of

11、two or more accounting periods. The related cash inflow or outflow does not always coincide with the period in which these revenue or expense items are recorded. Thus, the need for adjusting entries results from timing differences between the receipt or disbursement of cash and the recording of reve

12、nue or expenses. For example, if we handle transactions on a cash basis, only cash transactions during the year are recorded. Consequently, if a companys employees are paid every two weeks and the end of an accounting period occurs in the middle of these two weeks, neither liability nor expense has

13、been recorded for the last week. To bring the accounts up to date for the preparation of financial statements, both the wage expense and the wage liability accounts need to be increased.A necessary step in the accounting process, then, is the adjustment of all accounts to an accrual basis and their

14、subsequent posting to the general ledger. Adjusting entries are therefore necessary to achieve a proper matching of revenues and expenses in the determination of net income for the current period and to achieve an accurate statement of the assets and equities existing at the end of the period.Adjust

15、ment principlesThe revenue recognition principle The matching principle What to adjust?Each adjusting entry affects both a real account （assets, liability, or owners equity） and a nominal or income statement account （revenue or expense）. The four basic types of adjusting entries are:deferred expense

16、s that benefits more than one period: for example, prepaid expenses （e.g. prepaid insurance, rent） are expenses paid in advance and recorded as assets before they are used or consumed. When these assets are consumed, expenses should be recognized: a debit to an expense account and a credit to an ass

17、et account. Another example is depreciation. The cost of a long-term asset is allocated as an expense over its useful life. At the end of each period depreciation expense is recorded through an adjusting entry: a debit to a depreciation expense account and a credit to an accumulated depreciation acc

18、ount （a contra account used to total the past depreciation expenses on specific long-term assets）. accrued expenses that incurred but not yet paid or recorded: examples are employee salaries and interest on borrowed money. At the end of the accounting period, the accrued expense is recorded through

19、an adjusting entry: a debit to an expense account （i.e. Salaries Expense） and a credit to a liability account （i.e. Salaries Payable）. Accrued revenues that earned but not yet received or recorded: also called unrecorded revenues. Examples include interest revenues, rent revenues, etc. Such revenues

20、 accumulate with the passing of time, but the firm may have not received the payment or billed the client. An adjusting entry should be: a debit to an asset account （i.e. Accounts Receivable） and a credit to a revenue account （i.e. Interest Revenue）. Unearned revenues that are revenues received in c

21、ash before delivery of goods/services: examples are magazine subscription fees, customer deposits for services. These revenues are not earned yet and thus should be recorded as liabilities. An adjusting entry should be: a debit to a liability account （i.e. Unearned Revenue） and a credit to a revenue

22、 account （i.e. Revenue）. Revenue Principle: basis for recording revenues （ie tells when to record revenue and the amounts）.Matching Principle: basis for recording expensis （ie direction to ID all expenses during the period, measure them, and match them against the revenues earned in that period）.c.

23、explain why the accrual basis of accounting produces more useful incomestatements and balance sheets than the cash basis.Revenue is something earned through the sale of goods or services. Not all cash receipts are revenues; for example, cash received through a loan is not revenue. Expenses are the c

24、ost of goods or services used to generate revenues. Not all cash payments are expenses; for example, cash dividends paid to stockholders are not expenses. Net income is the difference between revenues and expenses. It is reported on the income statement, and is the focus in evaluating a firms profit

25、ability.Most companies use the accrual basis accounting, recognizing revenue when it is earned （the goods are sold or the services performed） and recognizing expenses in the period incurred, without regard to the time of receipt or payment of cash. Net income is revenue earned minus expenses incurre

26、d.Under the strict cash basis accounting, revenue is recorded only when the cash is received and expenses are recorded only when the cash is paid. Net income is cash revenue minus cash expenses. The matching principle is ignored here, resulting inconformity with generally accepted accounting princip

27、les.Todays economy is considerably more lubricated by credit than by cash. And the accrual basis, not the cash basis, recognizes all aspects of the credit phenomenon. Investors, creditors, and other decision makers seek timely information about an enterprises future cash flows. Accrual basis account

28、ing provides this information by reporting the cash inflows and outflows associated with earnings activities as soon as these cash flows can be estimated with an acceptable degree of certainty. Receivables and payables areforecasters of future cash inflows and outflows. In other words, accrual basis

29、 accounting aids in predicting future cash flows by reporting transactions and other events with cash consequences at the time the transactions and events occur, rather than when the cash is received and paid. Accrual accounting generally provides a better indication of performance than cash basis o

30、f accounting since it increases the comparability of income statements and balance sheets across periods.B. Financial Reporting and Analysisa. define each asset and liability category on the balance sheet and prepare a classified balance sheet.Think of the balance sheet as a photo of the business at

31、 a specific point in time. It presents the assets, liabilities, and the equity ownership of a business entity as of a specific date.Assets are the economic resources controlled by the firm. Liabilities are the financial obligations that the firm must fulfill in the future. Liabilities are typically

32、fulfilled by payment of cash. They represent the source of financing provided to the firm by the creditors. Equity Ownership is the owners investments and the total earnings retained from the commencement of the firm. Equity represents the source of financing provided to the firm by the owners.Balance sheet accounts are classified so that similar items