Chapter 2 - Financial statements and accounting concepts/principles. After studying this chapter you should understand: What are generally accepted accounting principle? What kind of information is reported on each financial statement and how are the financial statements related? What are transactions? What is the meaning and usefulness of the accounting equation? What are meanings of the captions in the financial statements? . | 2008 The McGraw Hill Companies Inc. All Rights Reserved. McGraw Hill Irwin Copyright 2014 by The McGraw Hill Companies Inc. All rights reserved. Chapter 2 Financial Statements and Accounting Concepts Principles PowerPoint Authors Susan Coomer Galbreath . CPA Charles W. Caldwell . CMA Jon A. Booker . CPA CIA Cynthia J. Rooney . CPA McGraw Hill Irwin Copyright 2014 by The McGraw Hill Companies Inc. All rights reserved. 23 LO 1 Financial Statements Transactions Procedures for sorting classifying and presenting bookkeeping Selection of alternative methods of reflecting the effects of certain transactions accounting Financial Statements An entity s financial statements are the end product of a process that starts with transactions between the entity and other organizations and individuals. 2008 The McGraw Hill Companies Inc. All Rights Reserved. McGraw Hill Irwin 2 3 24 LO 1 Accounts Transactions Transactions are are summarized summarized in in accounts. accounts. Cash Accounts Accounts are are used used to to Accounts organize organize like-kind like-kind Receivable transactions. transactions. Accounts Account Account balances balances are are then then Payable used used in in the the preparation preparation of of financial financial statements. statements. McGraw Hill Irwin 2 4 2008 The McGraw Hill Companies Inc. All Rights Reserved. 25 LO 2 Financial Statements Financial Statement that Required Disclosure Satisfies Requirement Financial position at the end of Balance Sheet the period Earnings for the period Income Statement Cash flows during the period Statement of Cash Flows Investments by and Statement of Changes in distributions to owners during Stockholders Equity the period In addition to the financial statements the annual report will probably include several accompanying notes or explanations of the accounting policies used and detailed information about many of the amounts and captions shown in the financial statements. McGraw Hill Irwin 2 5
