tailieunhanh - Lecture Engineering economics - Chapter 2: Introduction to financial statements and the accounting equation

Upon completion of this chapter you should understand: Basic concepts associated with the Income Statement, basic concepts associated with the Balance Sheet, cash flow and cash flow statements, financial statement generation and the accounting equation, other types of financial statements. | Chapter 2 -Unit 1 Introduction to Financial Statements and the Accounting Equation IET 35000 Engineering Economics 1 Learning Objectives - Chapter 2 Upon completion of this chapter you should understand Basic concepts associated with the Income Statement. Basic concepts associated with the Balance Sheet. Cash flow and cash flow statements. Financial statement generation and the accounting equation. Other types of financial statements. 2 1 Learning Objectives - Unit 1 Upon completion of this unit you should understand Basic concepts associated with the Income Statement. Basic concepts associated with the Balance Sheet. Cash flow and cash flow statements. Financial statement generation and the accounting equation. Other types of financial statements. 3 1 1 Financial Statements Financial statements Represent the financial history of the organization - both successes and failures. Assist in planning budgeting and investment analysis. Based on techniques over 300 years old. Importance Provide essential information for managers and administrators. Serve as the required external reporting method for publicly held organizations. 4 1 Income Statement Reports the financial activities over a period of time. Annual corporate reports include an Income Statement covering the financial activities during the firm s fiscal year. Income Statements covering less than a year time period are used for internal reporting budgeting and planning purposes. Amounts reported are in units of time period. Annual reports year. Income Statements are also known as Profit and Loss Statements. 5 1 Income Statement Typical Income Statement format includes three sections Section 1 Income from the sale of products or services less the cost to produce and deliver the products or services. Result is the gross profit. Section 2 Expenses associated with general administrative functions depreciations and income or costs of a nonrecurring nature are subtracted from the gross profit yielding the net income .