PowerPoint Presentation* * *
Investors, Suppliers & Creditors
See Learning Goal 1: Describe the importance of financial
information and accounting.
See text pages: 456-457
Also available on a Transparency Acetate
See Learning Goal 1: Describe the importance of financial
information and accounting.
See text pages: 456
The Accounting System
For students who are not taking an accounting class this slide can
help them understand an accounting system from a production
perspective:
Inputs - Sales documents, purchasing documents, payroll records
travel expenses, etc.
Processing – Entries are made to journals; then transferred into
ledgers; and finally summarized and reviewed to compile a trial
balance.
Outputs – Development of financial statements such as the balance
sheet, income statement, and statement of cash flows, that are
prepared for management personnel within the company as well as
interested parties outside the company.
* * *
Investors, Suppliers, & Creditors- provides a means to analyze
business
Also available on a Transparency Acetate
See Learning Goal 1: Describe the importance of financial
information and accounting.
See text pages: 457
The Influence of Accounting Information
This slide gives the student an overview of the importance of
accounting information when managing their business. Accounting
procedures are the foundation for controlling mechanisms that
businesses put in place to measure performance and plan for the
future.
Accounting influences decisions for managers in the following
ways:
Understanding cost behavior and perform cost-volume profit
analysis
Using cost allocation in planning and control
Using job-order-costing and process-costing to track the flow of
costs to products
Using relevant information to make marketing and production
decisions
Using capital budgeting techniques to make long-term capital
investment decisions
Accounting information can improve a company’s ability to compete
by:
Using competitor information and sales analysis to bring new
concepts to the financial planning process
Learning to spot financial trends to predict strategic business
decisions
Learning how to integrate technology into decision-making
* * *
C.P.A.
Auditing
See Learning Goal 2: Define and explain the different areas of the
accounting profession.
See text pages: 457-461
Also available on a Transparency Acetate
See Learning Goal 2: Define and explain the different areas of the
accounting profession.
Top Business Uses of Accountants
One of the biggest uses of accountants by business is the tax and
auditing business. Explain to the class that the theme of
“integrity of numbers” is critical for business.
In addition to the reasons listed on the acetate, accountants can
offer businesses the following value-added services:
Getting complete visibility of processes
Seeing the true cost of a process or part of a process
Seeing the cost of process changes, volume changes, headcount,
wastage, scrap, rejects, non-conformance, downtime
Seeing costs by job and by department
Seeing and comparing costs of outsourcing
Mapping business processes, organization-wide or job specific
Using scenario analysis to see how re-engineering will affect
resources such as costs and headcounts
(Source: Activemodeler.com)
Corporate Annual Report
Read management’s discussion of changes in operations. Try to
identify strengths or weaknesses.
Review the firm’s consolidated balance sheet. (Its assets,
liabilities, and owners’ equity.)
Analyze the Income Statement. Look beyond the year. (Sales drops
can spell trouble.)
Review the statement of changes in cash flows.
Review auditor’s opinion.
See Learning Goal 2: Define and explain the different areas of the
accounting profession.
* * *
Also available on a Transparency Acetate
See Learning Goal 2: Define and explain the different areas of the
accounting profession.
See text pages: 458
Types of Accountants
This slide helps highlight the difference in public and private
accounting. The topics of Certified Public Accountant (CPA) and
Certified Management Accountant (CMA) can also be discussed from
this information.
This may be a good time to discuss what accounting or finance
careers will do for students:
Develop them into a well rounded Business Executive
Help them learn how to analyze and forecast financial goals through
utilization of historical data, competitor information and
financial data/information
Make an impression at a multi-billion dollar corporation
See the company increase its financial vitality by being a part of
the financial planning and reporting process
(Source: Retailology.com)
Changing Inventory Valuation Methods- 1 Time Boost to Income
Phony Transactions With Partnerships
Also available on a Transparency Acetate
See Learning Goal 2: Define and explain the different areas of the
accounting profession.
Cooking the Books
This slide describes some questionable strategies companies have
used when presenting company financial information. Have the
students go through each item on the slide and discuss what they
mean.
The Security and Exchange Commission (SEC) has issued an account
bulletin referred to as SAB 101- Revenue Recognition. This issue
deals with company’s improperly recording revenue when received on
a contract rather than recognizing the revenue over the life of the
agreement.
According to the SEC, this is the single largest issue involving
companies restating their earnings. According to SmartPros.com,
“Companies try to boost revenue by manipulating the recognition of
revenue. Think about a bottle of wine. You wouldn’t pop the cork on
the bottle before it was ready. But some companies are doing this
with their revenue – recognizing it before a sale is complete,
before the product is delivered to a customer, or at a time when
the customer still has options to terminate, void, or delay the
sale.”
Revenue recognition issues are among the most serious financial
reporting problems. When revenue is inappropriately recognized,
serious cash flow problems can result. This situation causes stock
prices to plummet indefinitely.
The SEC recently issued SAB 101 which provides a good framework for
companies to follow. The two requirements that must exist for
revenue recognition are:
Revenue must be realized or realizable and earned. This does not
occur until all of the following criteria are met:
There is persuasive evidence of an arrangement.
Delivery has occurred or services have been rendered.
Price is defined or determinable.
Collectibles are reasonably assured.
Sneaky Accountant Tricks
Who’s who
Don’t fall for rapid refund
Know their loyalty
Also available on a Transparency Acetate
See Learning Goal 2: Define and explain the different areas of the
accounting profession.
5 Tips To Be Ahead of Sneaky Accountant Tricks
This slide presents the five tips to recognize the red flags about
accountants.
Ensure that the accountant is either a CPA or an enrolled agent.
Enrolled agents have either passed an IRS exam or has worked at
least five years with IRS. According to the Bureau of Labor
Statistics, there are over a million accountants, tax preparers,
and auditors. However, only 640,000 are Certified (CPAs).
Find out from the Better Business Bureau if there are any
complaints filed against the tax preparer. Watch out for big
promises.
Many tax preparers advertise Refund Anticipation Loan. People think
they are getting their own refund money, but these are actually
short term loans charging anywhere from 40 to 700 percent interest
in addition to fees.
Does your accountant’s loyalty lie with you or their own business?
You are responsible for making sure that you get the most out of
your tax return.
The personal information with your accountant may become available
to banks and mortgage brokers if you sign a consent form. So be
aware of what you sign.
(Source: CNNMoney.com, March 17, 2006)
* * *
Highlight the things that matter
List the risks and assumptions built into the numbers
Standardize operating income
Provide aid in figuring free-cash flow
Source: Business Week, February 18, 2002
Also available on a Transparency Acetate
See Learning Goal 2: Define and explain the different areas of the
accounting profession.
5 Ways to Avoid More Enrons
This slide presents five improvements that could help avoid more
Enron like situations.
Currently, a company can have Special Purpose Entities (SPEs) where
billions of off-balance sheet debt can be hidden. If a company can
find an investor who puts in 3% of the SPE, it can be removed from
the company’s balance sheet.
Anything less than 5 or 10% of earnings or assets was considered
“immaterial” to overall performance and could be left out of the
statements. For example, Tyco acquired hundreds of companies in
three years prior to 2002 totaling over $8 billion but did not
identify the specifics because each individual acquisition fell
below the threshold.
Transparency of risks and assumptions in numbers should be
present.
Pro forma operating earnings are not standardized and they are left
up to companies as to what to include or exclude.
How much free cash flow a company would earn is a guessing game and
left up to different interpretations.
(Source: Business Week, February 18, 2002)
* * *
August 29, 2002
January 26, 2003
April 26, 2003
Audit committees must: be independent directors, be responsible for
compensation & oversight of certifying accountants.
See Learning Goal 2: Define and explain the different areas of the
accounting profession.
Sarbanes-Oxley Timeline
This slide identifies the Sarbanes-Oxley Act of 2002, whereby the
Congress and the SEC imposed a variety of obligations and
restrictions on public companies. The statutory and regulatory
pronouncements include dates on which companies must act or refrain
from doing certain actions.
The SEC adopted regulations and a timeline to help companies
prepare for corporate governance and disclosure.
* * *
Due to Sarbanes-Oxley
Source: USA Today
* * *
Source: USA Today
* * *
Accounting Practices
Source: USA Today, “Snapshots”, Section B, pg. 1, March 26,
2003
See Learning Goal 2: Define and explain the different areas of the
accounting profession.
Steps Companies Take to Control Accounting Practices
Listed on this slide are items companies can practice to ensure
they are in compliance with GAAP guidelines and SEC policies.
Companies must realize the importance of controlling accounting
practices. This all starts with top management and must be
communicated throughout the organization. Establishing proper
accounting practices can have the following positive impact on your
organization:
Improved cost reporting by sector, department or item
* * *
Record/Journalize
Accounting
Analyze
Recommend
See Learning Goal 3: List the steps in the accounting cycle,
distinguish between accounting and bookkeeping, and explain how
computers are used in accounting.
See text pages: 461
Also available on a Transparency Acetate
See Learning Goal 3: List the steps in the accounting cycle,
distinguish between accounting and bookkeeping, and explain how
computers are used in accounting.
See text pages: 461
Steps in The Accounting Cycle
With this acetate students are provided with the step-by-step
progression of the accounting cycle. I would place particular
emphasis on the accounting cycle to give the student an overview of
reporting requirements.
The students should be able to explain the following
questions:
Can you explain the difference between accounting and
bookkeeping
What’s the difference between an accounting journal and a
ledger?
Why does a bookkeeper prepare a trial balance?
* * *
Accounting Packages
Up-To-the-Minute Information
Less Monotony
See Learning Goal 3: List the steps in the accounting cycle,
distinguish between accounting and bookkeeping, and explain how
computers are used in accounting.
See text pages: 462-463
Statement of Cash Flows – Statement of Cash Receipts &
Disbursements
See Learning Goal 4: Explain how the major financial statements
differ.
See text pages: 463
Very Vegetarian Company
See Learning Goal 4: Explain how the major financial statements
differ.
See text pages: 464
Also available on a Transparency Acetate
See Learning Goal 4: Explain how the major financial statements
differ.
See text pages: 464-467
Very Vegetarian’s Balance Sheet (Assets)
This slide shows the assets section of Very Vegetarian’s Balance
Sheet.
Walk the students through each classification of assets separately
to insure their understanding. Listed below are a couple items you
may want to address with the class:
What are current assets? Assets that are easily converted into cash
within one year.
What are fixed assets? Long-term (12 months are more) tangible
assets held for business use and not expected to be converted in
the current or upcoming fiscal year to cash.
* * *
(Liabilities & Owner’s Equity)
Retained Earnings 113,000
Also available on a Transparency Acetate
See Learning Goal 4: Explain how the major financial statements
differ.
See text pages: 464-467
Very Vegetarian’s Balance Sheet (Liabilities & Owner’s
Equity)
This slide contains the liabilities and owner’s equity for Very
Vegetarian.
It helps once again to walk students through the acetate
step-by-step and make certain students understand the accounts of
the balance sheet.
* * *
Gross Profit (Gross Margin) $ 290,000
Also available on a Transparency Acetate
See Learning Goal 4: Explain how the major financial statements
differ.
See text pages: 468
Very Vegetarian Income Statement
It’s important for students to understand the structure ,
objective, and relevance of the income statement to the
organization as well as outside users of this information.
Share with the class the following information regarding income
statements and their use in business:
Income statements are the major device for measuring the
profitability of a firm.
Income statements cover a defined period of time.
* * *
Net Income (Profit) Before Taxes $ 68,000
Less: Income Tax Expenses - $ 19,000
Net Income (Profit) After Taxes $ 49,000
Also available on a Transparency Acetate
See Learning Goal 4: Explain how the major financial statements
differ.
See text pages: 468
Very Vegetarian’s Income Statement (cont’d)
Although this slide does not address the term Pro Forma Income
Statements, you may want to address the definition and its use in
business practice.
Pro Forma Statements will provide a projection of how much profit
the firm anticipates making over the ensuing time period. In
developing the pro forma income statement, it is suggested that you
follow four important steps:
Establish a sales projection
Compute other expenses
Determine profit by completing the actual pro forma statement
* * *
Beginning Cash Balance ( 2,000)
Ending Cash Balance $ 25,000
See Learning Goal 4: Explain how the major financial statements
differ.
See text pages: 471
Current Liabilities
Current Ratio
See Learning Goal 5: Explain the importance of ratio analysis in
reporting financial information.
See text pages: 474
2.08
See Learning Goal 5: Explain the importance of ratio analysis in
reporting financial information.
See text pages: 474
287%
See Learning Goal 5: Explain the importance of ratio analysis in
reporting financial information.
See text pages: 474
Return on Equity
Return on Sales
Profitability = Operating Success
See Learning Goal 5: Explain the importance of ratio analysis in
reporting financial information.
See text pages: 475
$1,000,000
$700,000
$213,000
See Learning Goal 5: Explain the importance of ratio analysis in
reporting financial information.
See text pages: 475
Average Inventory
Inventory Turnover
See Learning Goal 5: Explain the importance of ratio analysis in
reporting financial information.
See text pages: 476
Tax/Auditing
Tax/Auditing