Analyzing Two Investments—An Instructional Case to Introduce Basic Financial Accounting Concepts

2018 ◽  
Vol 33 (4) ◽  
pp. 47-56
Author(s):  
Wendy J. Bailey ◽  
Janet A. Samuels
Keyword(s):  
Financial Reporting ◽  
Business Students ◽  
Balance Sheet ◽  
Cash Flows ◽  
Legal Aspects ◽  
Financial Accounting ◽  
Net Income ◽  
Income Statement ◽  
Orientation Session ◽  
Statement Of Cash Flows

ABSTRACT This case introduces basic financial accounting concepts to graduate business students in an accounting orientation session (i.e., “boot camp”). Students assume they have invested in two cupcake businesses in Paris and they now want to determine which business performed best. Instructors can use this case, which provides students an opportunity to compare two businesses, to achieve several learning objectives including those related to accrual accounting (i.e., when to record transactions), the legal aspects of business (i.e., company structure, stock ownership, international accounting), and the use of estimates in financial reporting (i.e., depreciation, bad debts). This case also introduces students to the three basic financial statements (i.e., balance sheet, income statement, statement of cash flows), and the evaluation of financial results (i.e., net income versus cash flow, ratios). We have found that this simple, straightforward case helps students feel more confident when working with basic financial accounting concepts.

Horse Vet, LLC: Transaction Analysis and Statement of Cash Flows Preparation (Option 1)

2017 ◽  
pp. 1-12
Author(s):  
Mark E. Haskins
Keyword(s):  
Financial Reporting ◽  
Balance Sheet ◽  
Financial Statements ◽  
Cash Flows ◽  
Financial Statement ◽  
Balance Sheets ◽  
Income Statement ◽  
Transaction Analysis ◽  
Business Events ◽  
Statement Of Cash Flows

This case pertains to the foundational underpinnings of the accounting process and the statement of cash flows. In Part I, students are presented with 23 business events that they must evaluate for recording in the financial records. Part II requires students to prepare a 2012 statement of cash flows using the information presented in the company's 2011 and 2012 year-end balance sheets along with its 2012 income statement. In Part III, students must rely on a 2011 balance sheet and a 2011 statement of cash flows to work backward to derive the 2010 year-end balance sheet. There are two versions of this case: Option 1 and Option 2. The Option 2 case is a bit more challenging than the Option 1 case. Instructors should use Option 2 if they feel students are well grounded in their understanding of financial statement relationships and the customary financial reporting of a typical set of business events. Both cases reinforce students' learning related to the accounting process and the connectivity between the financial statements. Please note that only one version of the case should be used due to the existence of some overlap between the two.

scholarly journals Back To Basics: Algebraic Foundations Of The Statement Of Cash Flows

2013 ◽  
Vol 7 (1) ◽  
pp. 93-98
Author(s):  
Donald T. Joyner ◽  
Jean-Marie Banatte ◽  
V. Reddy Dondeti
Keyword(s):  
Indirect Method ◽  
Business Students ◽  
Balance Sheet ◽  
Cash Flows ◽  
Black Box ◽  
Net Income ◽  
Undergraduate Level ◽  
Accounts Receivable ◽  
Accounts Payable ◽  
Statement Of Cash Flows

The indirect method for preparing the statement of cash flows, as described in many standard textbooks, involves an item-by-item approach, telling you to add to or subtract from the net income, the increases or decreases in the balance sheet items, such as accounts payable or accounts receivable. Many business students, especially at the undergraduate level, find these black-box-rules confusing. In recent years, several articles have appeared in the accounting literature, exploring the link between the algebraic foundations and the enumeration of items in the statement of cash flows. In this paper, an explanation is provided, through an analysis of the basic algebraic equation of the balance sheet, for the black-box-rules of the indirect method in a simple and concise manner.

scholarly journals The rules for the Cash Flow Statement in the International Financial Reporting Standard

2013 ◽  
Vol 7 (1-2) ◽  
pp. 71-73
Author(s):  
Anikó Türkössy
Keyword(s):  
Cash Flow ◽  
Financial Reporting ◽  
Balance Sheet ◽  
Cash Flows ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Historical Changes ◽  
Income Statement ◽  
Cash Flow Statement ◽  
Statement Of Cash Flows

Cash flow statement may provide considerable information about what is really happening in a business beyond that contained in either the income statement or the balance sheet. Analyzing this statement should not present an intimidating task; instead it will quickly become obvious that the benefits of understanding the sources and uses of a company’s cash far outweigh the costs of undertaking some very straightforward analyses. The objective of IAS 7 is to require the presentation of information about the historical changes in cash and cash equivalents of an entity by means of a statement of cash flows, which classifies cash flows during the period according to operating, investing, and financing activities.

Financial Reporting and Auditing Agent with Net Knowledge (FRAANK) and eXtensible Business Reporting Language (XBRL)

2005 ◽  
Vol 19 (1) ◽  
pp. 19-41 ◽  
Author(s):  
Matthew Bovee ◽  
Alexander Kogan ◽  
Kay Nelson ◽  
Rajendra P. Srivastava ◽  
Miklos A. Vasarhelyi
Keyword(s):  
Financial Reporting ◽  
Financial Analysis ◽  
Balance Sheet ◽  
Cash Flows ◽  
Financial Information ◽  
The Internet ◽  
Practical Applications ◽  
Income Statement ◽  
Accounting Numbers ◽  
Statement Of Cash Flows

This paper describes the development and applications of FRAANK—Financial Reporting and Auditing Agent with Net Knowledge. The prototype of FRAANK presented here provides automated access to, and understanding and integration of, rapidly changing financial information available from various sources on the Internet. In particular, FRAANK implements intelligent parsing to extract accounting numbers from natural-text financial statements available from the SEC EDGAR repository. FRAANK develops an “understanding” of the accounting numbers by means of matching the line-item labels to synonyms of tags in an XBRL taxonomy. As a result, FRAANK converts the consolidated balance sheet, income statement, and statement of cash flows into XBRL-tagged format. Based on FRAANK, we propose an empirical approach toward the evaluation and improvement of XBRL taxonomies and for identifying and justifying needs for specialized taxonomies by assessing a taxonomy fit to the historical data, i.e., the quarterly and annual EDGAR filings. Using a test set of 10-K SEC filings, we evaluate FRAANK's performance by estimating its success rate in extracting and tagging the line items using the year 2000 C&I XBRL Taxonomy, Version 1. The evaluation results show that FRAANK is an advanced research prototype that can be useful in various practical applications. FRAANK also integrates the accounting numbers with other financial information publicly available on the Internet, such as timely stock quotes and analysts' forecasts of earnings, and calculates important financial ratios and other financial-analysis indicators.

scholarly journals IPTEKS NILAI WAKTU UANG DAN IMPLIKASI PENCATATAN AKUNTANSI

2019 ◽  
Vol 3 (2) ◽  
Author(s):  
Novi Swandari Budiarso
Keyword(s):  
Interest Rate ◽  
Balance Sheet ◽  
Financial Statements ◽  
Cash Flows ◽  
Time Value Of Money ◽  
Time Value ◽  
Financial Position ◽  
Income Statement ◽  
Statement Of Cash Flows ◽  
Value Of Money

Most of general public and firms know about money and its value but do not have better understanding how the money creates its own value relates to interest rate. Another side, most of firms still not realize that the time value of money has an impact on accounting recording and its reporting in financial statements, such as statement of financial position (balance sheet), income statement, and statement of cash flows.

Dog Concierges, LLC: Transaction Analysis and Statement of Cash Flows Preparation

2017 ◽  
pp. 1-9
Author(s):  
Mark E. Haskins
Keyword(s):  
Balance Sheet ◽  
Financial Statements ◽  
Cash Flows ◽  
Balance Sheets ◽  
Income Statement ◽  
Transaction Analysis ◽  
Business Events ◽  
Statement Of Cash Flows

This case is appropriate in a MBA module for the accounting process and is also an excellent exam case. It provides a diagram of the three basic financial statements (balance sheet, income statement, and statement of cash flows) used to capture, codify, and communicate the effects of a series of typical business events. The case also gives students the opportunity to prepare a simple statement of cash flows using two sequential balance sheets and to work backward from a balance sheet and statement of cash flows to craft the beginning of the year's balance sheet.

scholarly journals Applicative aspects of bank′s financial reporting: Analytical framework of a single banking report

2003 ◽  
Vol 46 (1-2) ◽  
pp. 73-110
Author(s):  
Sinisa Ostojic
Keyword(s):  
Financial Reporting ◽  
Balance Sheet ◽  
Financial Statements ◽  
Analytical Framework ◽  
Bank Performance ◽  
Net Income ◽  
Small Community ◽  
Bank Profitability ◽  
Banking Organization ◽  
Income Statement

This paper introduces financial statements of commercial banks and presents a procedure for analyzing bank profitability and risks using historical data. The procedure involves decomposing aggregate profit ratios into their components to help identify key factors that influence performance. This paper presents a procedure for analyzing bank performance using periodic balance sheet and income statement data. It describes the components of financial statements, provides a framework for comparing the trade-off between bank profitability and risk, and compares the performance of a small community bank with that of a large super regional banking organization. It uses data presented in a banks Uniform Bank Performance Report (UBPR) to demonstrate the analysis. Many banks experience dramatic changes in profits from one period to the next or relative to what stock analysts expect. In many cases, profits are lower because of unanticipated loan losses. In other cases, profits are higher because of extraordinary growth in noninterest income. A key point is that it is becoming increasingly difficult to evaluate performance by looking at reported balance sheet and income statement data. Net income can be managed, or manipulated, by bank managers to disguise potential problems. In this paper I examine how banks, the most important of all the financial intermediaries, operate to earn the highest profits possible: how and why they make loans, how they acquire funds and manage their assets and liabilities (debts), and how they earn income.

scholarly journals Finding an Easier Way to Explain the Statement of Cash Flows

2021 ◽  
Vol 11 (3) ◽  
pp. 25
Author(s):  
Seung Hwan Kim
Keyword(s):  
Indirect Method ◽  
Financial Statements ◽  
Cash Flows ◽  
Financial Accounting ◽  
The Other ◽  
Net Income ◽  
Public Companies ◽  
Difficult Time ◽  
Statement Of Cash Flows ◽  
Operating Activities

The statement of cash flows is one of the required financial statements of public companies, and thus is required of all accounting majors. After learning the other required financial statements in an introductory financial accounting course and, again, in the first intermediate accounting course, accounting majors learn how to prepare the statement of cash flows in the second or last intermediate accounting course. Most accounting majors find the statement of cash flows significantly more difficult to learn than any other financial statements. Especially, students find it most difficult to understand the indirect method of preparing the statement of cash flows. Preparing the statement of cash flows using the indirect method, students go through the most difficult time, specifically, doing the adjustments that are made to net income to reconcile to cash flows from operating activities.In this paper, presented is a different way to explain the principles of indirect method of preparing the statement of cash flows with a focus on the reconciliation of net income to cash flows from operating activities. Different from the explanations in the textbooks available in the market, the approach presented in the paper is preferred by all the students who were taught the statement of cash flows. Also, pointed out in the paper are a few things that students are easily confused of in learning the statement of cash flows.

AKUNTANSI KEUANGAN DAN STANDAR AKUNTANSI

2019 ◽  
Author(s):  
Budi Gautama Siregar
Keyword(s):  
Cash Flows ◽  
Financial Accounting ◽  
Financial Position ◽  
Income Statement ◽  
Statement Of Cash Flows ◽  
Retained Earnings

Akuntansi Keuangan (Financial Accounting) adalah sebuah proses pembuatan laporan keuangan yang menyangkut kegiatan operasional perusahaan secara menyeluruh dan akan digunakan oleh pihak-pihak yang berkepentingan diantaranya investor, manajer, serikat pekerja, kreditor, dan lembaga pemerintahan. Laporan keuangan adalah sarana pengkomunikasian informasi keuangan kepada pihak-pihak eksternal. Laporan keuangan biasanya menyajikan sejarah berdirinya perusahaan, neraca (Statement of Financial Position), laporan laba rugi (Income Statement), laporan arus kas (Statement of Cash Flows), laporan perubahan modal (Retained Earnings Statement), dan dilengkapi catatan atas laporan keuangan atau penjelasan mengenai laporan keuangan yang disajikan. Standar Akuntansi Keuangan (SAK) adalah suatu kerangka dalam prosedur pembuatan laporan keuangan agar terjadi keseragaman dalam penyajian laporan keuangan.

Accounting for Market Equilibrium – Comparing the Revenue-Expense to the Balance-Sheet Approach

2019 ◽  
Vol 0 (0) ◽  
Author(s):  
Eduard Braun
Keyword(s):  
Financial Reporting ◽  
Market Equilibrium ◽  
Balance Sheet ◽  
Fair Value ◽  
Financial Accounting ◽  
Market Process ◽  
Net Income ◽  
Fair Value Accounting ◽  
Suitable Framework ◽  
Value Measurement

AbstractThis paper combines the market process approach developed by the Austrian School of Economics with the theory of capital as worked out by the Historical School in order to provide a suitable framework for discussing the two competing approaches to financial accounting. Within this framework, it becomes clear that the revenue-expense approach with its emphasis on actually realized, historical transactions plays an important role in creating a tendency towards market equilibrium. Net income determined according to this approach provides information to the market on where there are gaps in the price structure. The balance-sheet approach, on the other hand, and particularly fair value measurement take market equilibrium for granted. Based on fair value accounting, an equilibrium could never be accomplished in the first place. Ironically, in order to be applicable, the balance-sheet approach presupposes the perfect working of the market process, including financial reporting based on the revenue-expense approach.

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