Chapter 5 - Balance sheet and statement of cash flows. After studying this chapter, you should be able to: Explain the uses and limitations of a statement of financial position, identify the major classifications of the statement of financial position, prepare a classified statement of financial position using the report and account formats,. | PREVIEW OF CHAPTER 5 Intermediate Accounting 16th Edition Kieso ● Weygandt ● Warfield Explain the uses and limitations of a balance sheet. Identify the major classifications of the balance sheet. Prepare a classified balance sheet using the report and account formats. Identify the purpose and content of the statement of cash flows. LEARNING OBJECTIVES Prepare a basic statement of cash flows. Understand the usefulness of the statement of cash flows. Determine which balance sheet information requires supplemental disclosure. Describe the major disclosure techniques for the balance sheet. After studying this chapter, you should be able to: Balance Sheet and Statement of Cash Flows 5 LO 1 Balance Sheet, sometimes referred to as the statement of financial position: Reports assets, liabilities, and equity at a specific date. Provides information about resources, obligations to creditors, and equity in net resources. Helps in predicting amounts, timing, and uncertainty of future cash flows. BALANCE SHEET LO 1 Computing rates of return. Evaluating the capital structure. Assess risk and future cash flows. Analyze the company’s: Liquidity, Solvency, and Financial flexibility. Usefulness of the Balance Sheet BALANCE SHEET LO 1 Most assets and liabilities are reported at historical cost. Use of judgments and estimates. Many items of financial value are omitted. Limitations of the Balance Sheet BALANCE SHEET LO 1 The terrorist attacks of September 11, 2001, showed how vulnerable the major airlines are to falling demand for their services. Since that infamous date, major airlines have reduced capacity and slashed jobs to avoid bankruptcy. United Airlines, Northwest Airlines, US Airways, and several smaller competitors filed for bankruptcy in the wake of 9/11. Delta Airlines made the following statements in its annual report issued shortly after 9/11: “If we are unsuccessful in further reducing our operating costs . . . we will need to restructure our costs under Chapter 11 of the | PREVIEW OF CHAPTER 5 Intermediate Accounting 16th Edition Kieso ● Weygandt ● Warfield Explain the uses and limitations of a balance sheet. Identify the major classifications of the balance sheet. Prepare a classified balance sheet using the report and account formats. Identify the purpose and content of the statement of cash flows. LEARNING OBJECTIVES Prepare a basic statement of cash flows. Understand the usefulness of the statement of cash flows. Determine which balance sheet information requires supplemental disclosure. Describe the major disclosure techniques for the balance sheet. After studying this chapter, you should be able to: Balance Sheet and Statement of Cash Flows 5 LO 1 Balance Sheet, sometimes referred to as the statement of financial position: Reports assets, liabilities, and equity at a specific date. Provides information about resources, obligations to creditors, and equity in net resources. Helps in predicting amounts, timing, and uncertainty of future cash flows.
