FINANCIAL ACCOUNTING (ACCT2200)

Discussion of Accounting An accountant’s functions include Classifying and summarizing, made easier by the repetitive nature of business transaction

What is financial statement analysis? ƒ What is ratio analysis? ƒ The mechanics of and inferences from: ƒ Profitability ratios ƒ Risk ratios

Obligations that must be discharged in a short period of time (generally less than one year) „ Reported on balance sheet at nominal value examples: ƒ Accounts payable ƒ Short-term borrowings ƒ Current portion of long-term debt ƒ Deposits ƒ Warranties ƒ Deferred Revenues / Income

ALLOWANCE FOR RETURNS Receivables and Revenue Recognition A Quick Look at Intel’s Statements

Balance Sheet: Investments and Financing Management Discussion „ Auditor’s Report „ Consolidated Balance Sheet „ Consolidated Net Income „ Consolidated Statement of Stockholders Equity „ Consolidated Cash Flow Statements „ Notes to Accounts

Understand how differences in “book” vs. tax accounting for ,lead to deferred taxes Understand how the matching principle influences „ the capitalization of long-lived assets „ the expensing of capitalized costs to match revenues generated in the use of long-lived assets

What is annual depreciation expense for each of the first two years? „ What is book value at the end of 2nd year? „ How do we account for the improvement? „ What is annual depreciation expense for years 3 and beyond?

Understand when accounting departs from the “transactions- based” model and towards market-driven valuations

Nature and reporting of current liabilities ƒ Understand the nature and reporting requirements of contingencies ƒ Illustrate the trade-off between reliability and relevance in accounting for contingencies

Receivables and Revenue Recognition Why do we care about revenue recognition? Criteria for revenue recognition Some Details of SAB 101