AC 310 7th Edition Exam 1 Study Guide Lectures 1 5 Lecture 1 January 8 Objectives of Financial Accounting Financial reporting should provide information that A Is useful to present and potential investors and creditors and other users in making rational investment credit and similar decisions B Helps present and potential investors and creditors and other users in assessing the amounts timing and uncertainty of prospective cash receipts C Clearly portrays the economic resources of an enterprise the claims to those resources and the effects of transactions events and circumstances that change its resources and claims to those resources Role of the Auditor Auditors serve as independent intermediaries to help ensure that management has appropriately applied U S GAAP in preparing the company s financial statements Underlying Assumptions Economic entity All economic events identified with a particular economic entity Going concern Business entity will continue to operate indefinitely Periodicity Life of company is divided into time periods to provide timely information Monetary unit Financial statements are measured in a particular monetary unit like the US dollar Lecture 2 January 13 Rules for Adjusting Entries 1 End of Accounting Period Adjusting entries always occur at the end of an accounting period monthly quarterly annually 2 Balance Sheet and Income Statement Adjusting entries always involves a balance sheet AND an Income Statement account 3 NO CASH The cash account is never used with Adjusting Entries If you are using cash then it is not an adjusting entry 4 Repeat 1 3 Always remember rules 1 3 and that DEBITS CREDITS with any journal entry Lecture 3 January 15 Key Take Aways from Chapter 4 1 Components of the Income Statement 2 Prepare a multi step income statement 3 Intraperiod tax allocation 4 Comprehensive income and statement of comprehensive income 5 Earnings per share calculations and statement of retained earnings 6 Conceptual framework definitions of revenue expenses gains and losses 7 Change in principle v change in estimates retrospective adjustment 8 Identify key differences between IFR and US GAAP Lecture 4 January 20 Reporting Discontinued Operations Reporting for Components Sold a Income or loss from operations of the component from the beginning of the reporting period to the disposal date b Gain or loss on the disposal of the component s assets Reporting for Components Held for Sale a Income or loss from operations of the component from the beginning of the reporting period to the end of the reporting period b An Impairment loss if the carrying value of the assets of the component is more than the fair value minus cost to sell Lecture 5 January 22 Five Measures of Income 1 Gross Profit 2 Operating Income 3 Income from Continuing Operations 4 Net Income 5 Comprehensive Income Comprehensive Income All changes in equity during a period except those resulting from investments b owners and distributions to owners Includes All revenues and gains expenses and losses reported in net income and all gains and losses that bypass net income but affect stockholders equity