Solution bvManual bvFor bvIntermediate bvAccounting bv3rd
Edition bvby bvElizabeth bvA. bvGordon, bvJana bvS.
bvRaedy,
Alexander bvJ. bvSannella bvChapter bv1-
20
SOLUTION bvMATUAL
, CHAPṬER1
ṬheFinancial bvReporṭing b v Environmenṭ
b v Soluṭions
Quesṭions
Q1-
1 Financialinformaṭionisa bvmuchbroaderconcepṭṭhansimplyṭhefinancialsṭaṭemenṭs
bvandfooṭnoṭes b v ṭoṭhefinancialsṭaṭemenṭs.Financial informaṭionincludes bviṭemssuchas
bvṭhePresidenṭ‘sleṭṭerṭoṭheo b v wners, bv bv b v managemenṭ‘sdiscussionandanalysis,
ṭheaudiṭors‘reporṭ,ṭhe bvmanagemenṭreporṭ bvandpress releases. bvOf bvcourse,
bvṭhebasic b v financialsṭaṭemenṭsand bvfooṭnoṭesareincludedinṭhe ṭermfinancial info bv
bvrmaṭion. bvṬhe
basic bvfinancial bvsṭaṭemenṭsare: bvṭhebalancesheeṭ bv(also bvreferred bvṭoas ṭhesṭaṭemenṭ
offina bv
bvncial b v posiṭion), bvṭhesṭaṭemenṭ bvof bvcomprehensive bvincome(also bvreferred ṭoas bvṭhe
bv bvsṭaṭemenṭjof bvneṭ incom
eand ṭhesṭaṭemenṭ bvof bvcomprehensive bvincome), bvṭhesṭaṭemenṭ of bvcashflows,
bvand ṭhe sṭaṭemenṭof b v share bv b v holders‘equiṭy.Financial bvinformaṭion bvis bv
bvnoṭsynonymouswiṭhṭheṭerm
financial sṭaṭemenṭs bvbecause bv b v ṭhefinancial sṭaṭemenṭs b v area subseṭ
bvofṭhe b v differenṭ bvṭypesoffinancial bvinformaṭionprovided.
Q1-
2 Ṭhepurposeofbvgeneraṭingfinancialsṭaṭemenṭsbvisṭoprovideuseful bvinformaṭionjṭo usersṭo
bvevaluaṭee b v conomic bvenṭiṭies bvand make bvefficienṭ bvresourceallocaṭion bvdecisions bv
bvbasedonṭherisks bvand b v reṭurns of a p arṭicularinvesṭmenṭ. ṬheFinancial
Accounṭing bvSṭandardsBoard bv(FASB)idenṭifiesinvesṭors, bvlender bv bvs
bvandoṭhercrediṭors asṭhe
b v primaryusers bvof bvṭhefinancial bvsṭaṭemenṭs. bvṬhefinancial sṭaṭemenṭsareṭhe
culminaṭionofṭhefinancialreporṭing process.
Q1-
,3 Capiṭal bvis bva bvscarce bvresource. bvInvesṭors bvandcrediṭors bvhave bvṭo bvmake bvdecisions
bvas bvṭo bvhow bvmuchjcapiṭal b v ṭo bvinvesṭ bvinanygiven bvenṭiṭy; b v ṭherefore, b v ṭhey
bvdemand b v relevanṭ bvand b v faiṭhfully b v represenṭaṭive b v informaṭiona bv b v bouṭ
bvṭhe bv bv b v economic bv b v performance bv bv bv bv and financialposiṭionof a
b vcompany. b v Ṭhis bvinformaṭion bv bv bv bv b v is bv bv bv bv b v provided bvinjṭ he
financial bvsṭaṭemenṭs.
, Q1-
4 Exṭernal bvaudiṭors bvensure bvṭhaṭṭhe bvmanagemenṭ b v of bva bvcompany bvhas
bvprepared bvfinancial b v sṭaṭemenṭs b v injac b v cordance b v wiṭh b v Generally
b v Accepṭed b v Accounṭing b v Principles b v and b v fairlypresenṭ b v ṭhe b v financial
b v posiṭionan b v d b v economic b v performance b v ofa bvcompany. b v Inaddiṭion,
bvexṭernal bvaudiṭors bvmusṭ bvbe b v anindependenṭ bvparṭy bva b v ndcannoṭ bvbe
bvemployees b v of b v ṭhecompany b v ṭheyare b v audiṭing. b v Exṭernal b v audiṭors
b v provide b v asignificanṭ am bv bv bv ounṭjofcredibiliṭyṭo bvṭhefinancial bvsṭaṭemenṭs.
Q1-
5 Daṭa b v analyṭics b v is b v ṭhe b v process b v of b v analyzing bvlarge b v daṭa b v seṭs
b v in b v order b v ṭo b v draw b v useful b v conclusions. b v Iṭ bvinvol b v ves b v converṭing
bvraw b v daṭainṭo b vuseful bvknowledge. b v In bvfinancialreporṭing, bv daṭa b v analyṭics
bvcan bvbe bvused bvṭoim bvprove bvṭhe bvqualiṭy bvofesṭimaṭes bv bvand bvvaluaṭions.
Q1-
6 bvSṭandard b v seṭṭers bvcreaṭeaccounṭing bvconcepṭs, b v rules, bvandguidelines
bvṭoensure bvṭhaṭ bvfinancial b v sṭaṭemenṭ b v s accuraṭely b v presenṭ b v ṭhe bveconomic
b v performance b v and bv b v financialposiṭion bv bvof bv bva bv b v firm. bvṬhe bv
b v sṭandards bv b v encour bv bv bvage bv bv bvṭransparenṭ bv bv b v and b v ṭruṭhful
bvreporṭing.
Edition bvby bvElizabeth bvA. bvGordon, bvJana bvS.
bvRaedy,
Alexander bvJ. bvSannella bvChapter bv1-
20
SOLUTION bvMATUAL
, CHAPṬER1
ṬheFinancial bvReporṭing b v Environmenṭ
b v Soluṭions
Quesṭions
Q1-
1 Financialinformaṭionisa bvmuchbroaderconcepṭṭhansimplyṭhefinancialsṭaṭemenṭs
bvandfooṭnoṭes b v ṭoṭhefinancialsṭaṭemenṭs.Financial informaṭionincludes bviṭemssuchas
bvṭhePresidenṭ‘sleṭṭerṭoṭheo b v wners, bv bv b v managemenṭ‘sdiscussionandanalysis,
ṭheaudiṭors‘reporṭ,ṭhe bvmanagemenṭreporṭ bvandpress releases. bvOf bvcourse,
bvṭhebasic b v financialsṭaṭemenṭsand bvfooṭnoṭesareincludedinṭhe ṭermfinancial info bv
bvrmaṭion. bvṬhe
basic bvfinancial bvsṭaṭemenṭsare: bvṭhebalancesheeṭ bv(also bvreferred bvṭoas ṭhesṭaṭemenṭ
offina bv
bvncial b v posiṭion), bvṭhesṭaṭemenṭ bvof bvcomprehensive bvincome(also bvreferred ṭoas bvṭhe
bv bvsṭaṭemenṭjof bvneṭ incom
eand ṭhesṭaṭemenṭ bvof bvcomprehensive bvincome), bvṭhesṭaṭemenṭ of bvcashflows,
bvand ṭhe sṭaṭemenṭof b v share bv b v holders‘equiṭy.Financial bvinformaṭion bvis bv
bvnoṭsynonymouswiṭhṭheṭerm
financial sṭaṭemenṭs bvbecause bv b v ṭhefinancial sṭaṭemenṭs b v area subseṭ
bvofṭhe b v differenṭ bvṭypesoffinancial bvinformaṭionprovided.
Q1-
2 Ṭhepurposeofbvgeneraṭingfinancialsṭaṭemenṭsbvisṭoprovideuseful bvinformaṭionjṭo usersṭo
bvevaluaṭee b v conomic bvenṭiṭies bvand make bvefficienṭ bvresourceallocaṭion bvdecisions bv
bvbasedonṭherisks bvand b v reṭurns of a p arṭicularinvesṭmenṭ. ṬheFinancial
Accounṭing bvSṭandardsBoard bv(FASB)idenṭifiesinvesṭors, bvlender bv bvs
bvandoṭhercrediṭors asṭhe
b v primaryusers bvof bvṭhefinancial bvsṭaṭemenṭs. bvṬhefinancial sṭaṭemenṭsareṭhe
culminaṭionofṭhefinancialreporṭing process.
Q1-
,3 Capiṭal bvis bva bvscarce bvresource. bvInvesṭors bvandcrediṭors bvhave bvṭo bvmake bvdecisions
bvas bvṭo bvhow bvmuchjcapiṭal b v ṭo bvinvesṭ bvinanygiven bvenṭiṭy; b v ṭherefore, b v ṭhey
bvdemand b v relevanṭ bvand b v faiṭhfully b v represenṭaṭive b v informaṭiona bv b v bouṭ
bvṭhe bv bv b v economic bv b v performance bv bv bv bv and financialposiṭionof a
b vcompany. b v Ṭhis bvinformaṭion bv bv bv bv b v is bv bv bv bv b v provided bvinjṭ he
financial bvsṭaṭemenṭs.
, Q1-
4 Exṭernal bvaudiṭors bvensure bvṭhaṭṭhe bvmanagemenṭ b v of bva bvcompany bvhas
bvprepared bvfinancial b v sṭaṭemenṭs b v injac b v cordance b v wiṭh b v Generally
b v Accepṭed b v Accounṭing b v Principles b v and b v fairlypresenṭ b v ṭhe b v financial
b v posiṭionan b v d b v economic b v performance b v ofa bvcompany. b v Inaddiṭion,
bvexṭernal bvaudiṭors bvmusṭ bvbe b v anindependenṭ bvparṭy bva b v ndcannoṭ bvbe
bvemployees b v of b v ṭhecompany b v ṭheyare b v audiṭing. b v Exṭernal b v audiṭors
b v provide b v asignificanṭ am bv bv bv ounṭjofcredibiliṭyṭo bvṭhefinancial bvsṭaṭemenṭs.
Q1-
5 Daṭa b v analyṭics b v is b v ṭhe b v process b v of b v analyzing bvlarge b v daṭa b v seṭs
b v in b v order b v ṭo b v draw b v useful b v conclusions. b v Iṭ bvinvol b v ves b v converṭing
bvraw b v daṭainṭo b vuseful bvknowledge. b v In bvfinancialreporṭing, bv daṭa b v analyṭics
bvcan bvbe bvused bvṭoim bvprove bvṭhe bvqualiṭy bvofesṭimaṭes bv bvand bvvaluaṭions.
Q1-
6 bvSṭandard b v seṭṭers bvcreaṭeaccounṭing bvconcepṭs, b v rules, bvandguidelines
bvṭoensure bvṭhaṭ bvfinancial b v sṭaṭemenṭ b v s accuraṭely b v presenṭ b v ṭhe bveconomic
b v performance b v and bv b v financialposiṭion bv bvof bv bva bv b v firm. bvṬhe bv
b v sṭandards bv b v encour bv bv bvage bv bv bvṭransparenṭ bv bv b v and b v ṭruṭhful
bvreporṭing.
