After completing this chapter, students will be able to: Prepare an income statement, a statement of retained earnings, and a balance sheet; explain how the income statement and the statement of retained earnings relate to the balance sheet; explain the concept of adequate disclosure;. | The Accounting Cycle Reporting Financial Results Chapter 5 Chapter 5: The Accounting Cycle—Reporting Financial Results Preparing Financial Statements Publicly owned companies – those with shares listed on a stock exchange – have obligations to release annual and quarterly information to their stockholders and to the public. The annual report includes comparative financial statements and other information relating to the company’s financial position, business operations, and future prospects. The financial statements contained in the annual report must be audited by a firm of certified public accountants (CPAs). Publicly owned companies – those with shares listed on a stock exchange – have obligations to release annual and quarterly information to their stockholders and to the public. These companies don’t simply prepare financial statements – they publish annual reports. An annual report includes comparative financial statements for several years and a wealth of other information about the company’s financial position, business operations, and future prospects. Before the annual report is issued, the financial statements must be audited by a firm of certified public accounts (CPAs). Publicly owned companies must file their audited financial statements and detailed supporting schedules with the Securities and Exchange Commission. Business Earnings Dividends Business Losses Summarizes the increases and decreases in Retained Earnings during the period. The Statement of Retained Earnings Remember that net income increases retained earnings. Dividends and net losses decrease retained earnings for the period. Notes to the Financial Statements Examples of Items Disclosed Lawsuits pending Scheduled plant closings Governmental investigations Significant events occurring after the balance sheet date Specific customers that account for a large portion of revenue Unusual transactions and related party transactions Drafting the Notes that Accompany Financial . | The Accounting Cycle Reporting Financial Results Chapter 5 Chapter 5: The Accounting Cycle—Reporting Financial Results Preparing Financial Statements Publicly owned companies – those with shares listed on a stock exchange – have obligations to release annual and quarterly information to their stockholders and to the public. The annual report includes comparative financial statements and other information relating to the company’s financial position, business operations, and future prospects. The financial statements contained in the annual report must be audited by a firm of certified public accountants (CPAs). Publicly owned companies – those with shares listed on a stock exchange – have obligations to release annual and quarterly information to their stockholders and to the public. These companies don’t simply prepare financial statements – they publish annual reports. An annual report includes comparative financial statements for several years and a wealth of other information
