COMM 217 – Midterm

COMM 217 – Midterm Study Notes
Ch.1 – Financial Statements and Business Decisions

Four Basic Financial Statements:

Statement Purpose Key Components
Statement of Financial Reports financial position at Assets, Liabilities, Shareholders’
Position (Balance Sheet) a point in time Equity; Assets = Liabilities + Equity
Statement of Earnings Reports changes in equity Revenues, Expenses, Net Earnings,
(Income Statement) from operations Earnings per Share
Statement of Changes in Shows all changes to equity Contributed Capital, Retained
Equity during the period Earnings, Other Components
Operating (CFO), Investing (CFI),
Shows cash
Statement of Cash Flows Financing (CFF/CFA), Net Change in
inflows/outflows
Cash

Relationships:

1. Net earnings → Retained earnings → Equity on balance sheet.
2. Ending cash from cash flows → Cash on balance sheet.

Notes:

 Include accounting rules, additional details per line item, and financial disclosures.
 Accuracy is crucial; overseen by CFO, auditors, and board committees.



Ch.2 – Investing & Financing Decisions / Statement of Financial Position

Qualities of Useful Accounting Info:

 Fundamental: Relevant, Faithful Representation
 Enhancing: Comparability, Verifiability, Timeliness, Understandability

Assumptions:

 Separate Entity, Stable Monetary Unit, Continuity

Principles:

 Historical Cost Principle – assets recorded at purchase price.

Nature of Transactions: