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Accounting Terms and Factors
Terms in this set (18)
Occurs after company's fiscal year-end but before financial statements issued or available. Examples Issuance of Debt, or equity securities, business combinations or sale of a business, sale of an asset any event having a material effect on operations
Noteworthy Events/ Transaction
Related Party Transactions, errors, irregularities, and illegal acts
Business deal between two parties joined by special relationship prior economic substance may differ from legal form. When these transactions occur companies must disclose nature of the relationship, provide a description and report the dollar amounts and ay amount due from or related parties. Example Borrowing/lending money at an interest rate from the markets interest rate
Irregularities-are intentional distortions of the financial statement. Management fraud causes a different approach
Relatives of Irregularities
bribes kickbacks illegal contributions to political candidate.
Management Discussion and Analysis
It provides a biased but informed perspective of a company's operations liquidity and capital resources.
Current Assets/Current Liabilities
Acid Test (Quick Ratio)
Quick Asset/ Current Liabilities
Quick Assets -Cash, A.R. Short Term Investments Cash Equivalents more stringent indication of a company ability to pay current obligations
Debt To equity Ratio
Total Liabilities/Share Holders Equity
Debt to equity ratio - tells extent of reliance on creditors rather than owners, in provide resources
Return On Share Holders Equity
Net Income/Shareholders' Equity
Changes in Accounting Principles
Voluntary- accounted for retrospectively by revising prior year's financial statements. Involuntary Changes- calculate cumulative effect on year statement
Change In Accounting Estimate
reflected in Financial statement of the current period and future period.
Change in reporting Equity
preparation of financial statements for an accounting entity other than the entity that existed in the previous period.
Prior Period Adjustment
when previous accounting period had an error.
Gains/loss changes in foreign currency, Gains/loss due to revising assumptions, Derivative designated as cash flow, Change in market value of securities
Accumulated Other Comprehensive Income
is additional component of shareholders equity that's displayed separately.
Info providing details of many financial statements provided. Examples Pension plan, leases long-term debt investments Income Tax PP&E Employee benefits
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