ACC 400 Week 5 Team Assignment-Text Assignments

ACC 400 Week 5 Team Assignment-Text Assignments - BYP 13-7, Exercises 23.10 and 23.12 
                                    Week 5: E-text Learning Team Assignments
Financial Accounting: Tools for Business Decision Making,  4th edition
Chapter 13: Communication Activity: BYP 13-7
Write a memo to R.J. Falk that explains the basis for comparison and the factors affecting quality of earnings.
To:       R.J. Falk CEO
From:    Team B
Date:     May 24, 2010

Re:       Financial Statement Analysis

   The purpose of this memo is to explain (a) the bases for comparison in analyzingVenturafinancial statements and (b) the limitations, if any, in financial statement analysis. The financial statement holds pertinent information about the company, such as the financial status of the company and changes, if any, which should be made. These statements are important to investors and stockholders and therefore compliance of accounting rules is not only ethical but also important for the future of the business.
The company’s prepared financial statement is a comprehensive overview of the business’ journal entries; it includes the information from the cash flow statement, income statement, and   balance sheet. Each month entries are made of financial activity; the journal entries are collected to prepare the balance sheet. The balance sheet is an important document, which aids in the company financial accounting. The balance sheet contains all the company’s assets and liabilities; the assets are listed on one side and the liabilities on the other. Cash, inventory, investments, and accounts receivable make up current assets; receivables are account debts, which are owed to the company.  When added to the current assets, property, including land and equipment, and intangible assets make up total assets. (Total asset amounts include depreciation all property or equipment.) Liabilities divide into the same manner. All accounts payable including taxes, accounts, and wages are current liabilities; long term liabilities include bonds and notes owed on loans. Common stock, dividends and retained earnings make up the total liabilities and stockholders’ equity. The arrangement of accounts may differ with separate companies as eachbusiness determines its own model to accommodate for difference in industries.
The bases for comparison in analyzing Venturafinancial statements include industry averages, and intercompany. Industry averages compares the company’s financial relationship with the industry average. Intercompany compares the company’s financial relationship in the current year to the same relationship of one or more prior periods. Finally, intercompany compares the company’s financial relationship to the same of one or more competitor companies. To look at the different periods and determine if there is something that may need to be worked   on orchanged. Looking at the average ups and downs will determine the future for the company and to see if the company has what it takes to succeed. The limitations in financial statement analysis include pro forma income, alternative accounting methods, and improper recognition. Companies may report Generally Accepted Accounting Principles (GAAP) income and non-income, causing difficulty in determining earnings quality. Alternative accounting measures and variations in GAAP can also create variations in earnings quality. Finally, improper recognition can greatly affect earnings quality. Companies may report revenues or expenses in the wrong period to meet earnings goals; however, this reduces earnings quality. Placing items that do not need to be placed duet or there could be uncollected at any due time to do the companies credit status,  also misplacing wrong numbers in the incorrect section because of fail to understand where  items need to be placed or it may think that it would be a better place for it.

Financial and Managerial Accounting: The Basis forBusiness Decisions 13th edition

Chapter 23: Exercise 23.10
Complete the flexible budget at the 90,000-unit level of activity. Assume that the cost of goods sold and variable operating expenses vary directly with sales and that income taxes remain at 30 percent of operating income.
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