tailieunhanh - Ebook Introduction to financial accounting: Part 2

Part 2 book “Introduction to financial accounting” has contents: The communication of accounting information - the financial statements, equity financing, long-lived assets, partnerships, debt financing, financial statements analysis, the statement of cash flows. | C H A P T E R S E V E N The Communication of Accounting Information: The Financial Statements Chapters 1 through 6 discussed and illustrated the steps in the accounting cycle. They also discussed the concepts, assumptions, and procedures that provide a framework for financial accounting as a whole. Chapter 7 describes the content and presentation of financial statements. It consolidates what has been learned in previous chapters. The chapters you have already studied told you some of the rules of the game; this chapter will give you a better understanding of how the game is played. At the end of this chapter is a series of discussion questions, each keyed to the chapter where the material is covered. These questions should help you apply the theoretical concepts you have learned to the actual practice of accounting. Questions addressed in this chapter include: 1. How does accounting for wealth differ between economists and accountants? 2. How is the balance sheet classified? 3. How is the income statement classified? 4. What are the advantages of classified financial statements? 5. What is the distinction between selling expenses, and general and administrative expenses? 6. What is the purpose of the statement of changes in equity? 7. What are the purposes of notes to the financial statements? 8. What are the purposes and components of the auditor’s report and statement of management’s responsibility for the financial statements? CHAPTER 7 / The Communication of Accounting Information: The Financial Statements 293 A. Financial Statement Disclosure The objective of financial statements is to communicate information. This objective focuses on the needs of financial statement users, pre-eminently a company’s investors and creditors. Accounting information should make it easier for management to allocate resources and for shareholders to evaluate management. A related objective of financial statements is the fair presentation of the entity’s economic .