The discussion in this area will revolve around what accounting is, who the key parties in the financial reporting process are, the role of generally accepted accounting principles in the preparation of financial statements, and the regulatory environment of financial reporting in the United States. The information being discussed here will be found partly in Chapters 1 and 2.

DQ 2

Details of Financial Statements and Ratios (graded)

For this discussion, we will talk about the primary financial statements published by a corporation, the various classifications used in a balance sheet, the relationships among different financial statements, and how the numbers from the different financial statements are analyzed together to evaluate the financial position and performance of a company. The information being discussed here will be found partly in Chapter 1 and mostly in Chapter 2.

In order to keep our discussion organized, we will go according to the following plan.

1. Balance sheet (We will begin with this statement.)
2. Income statement (We will begin this discussion on Wednesday morning.)
3. Statement of retained earnings (We will begin this discussion on Thursday night.)
4. Statement of cash flows (We will begin this discussion on Friday night.)
5. Earnings per share, current ratio, and debt to total assets (We will begin this discussion on Saturday night.)

Let’s begin by asking the question: What is the purpose of a balance sheet? What information does it provide?