Tuesday, September 18, 2012

FR&A - Reporting Mechanics

Start 4:20 pm

Financial Reporting Mechanics

Unearned revenue = liability
Gains = count as revenue

Accounting equation:

  • Assets = Liabilities + Equity
  • Expanded: Assets = Liabilities + contributed capital + ending retained earnings
  • OR Assets = L + contributed capital + beginning RE + revenue - expense - dividends


Double entry accounting

Need for accruals

  • Unearned revenue - cash goes up, liability goes up
    • When recognized, liability goes down, sales goes up
  • Accrued revenue - firm provides good before it receives cash
  • Prepaid/accrued expenses
  • Effect is to recognize expense in the proper period
Changes in asset values are gains/losses, or shown in 'other comprehensive income'

Accounting system
  • Journal entries for every transaction > general journal
  • General ledger organizes entries by account
  • End of each period, initial trial balance is prepared, then adjusted if needed
  • Account balances from adjusted trial balances is presented in financial statements
Crucial for an analyst to look at MD&A.  Can help spot things that look out of line.

End
4:35 pm
0.25 hours

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