Accurate financial statements are essential to informed decision making. The first step in ensuring accuracy of financial statements is the correct recording of business transactions. In this simulation we will go through and discuss the importance of accurate financial statements. Let's begin by given a synopsis of the simulation: Connie Rocha pondered the future of her small new business. She took care of the marketing activities, with the help of community contacts getting business would not be a problem. Her sister on the other hand would supervise the production of the business. But when business started to become really lucrative, Connie needed someone to maintain the accounting books. Connie asked Tony Levin a CPA and I to help her maintain her accounting books for her business. While getting her books together Tony informed me that one way of looking at business transactions is to identify the property under discussion, its owner, and the amount of increase or decrease caused by the transaction. First we need to discuss the transactions in the simulation, and how they affect more than one financial statement. I will identify five transactions in the simulation and specify the different information that is conveyed to the manager in each of the financial statements.
Financial statements form part of the process of financial reporting. A complete set of financial statements normally includes a balance sheet, an income statement, a statement of changes in financial position (which may be presented in a variety of ways, for example, as a statement of cash flows or a statement of funds flow), and those notes and other statements and explanatory material that are an integral part of the financial statements. They may also include supplementary schedules and information based on or derived from, and expected to be read with, such statements. Such schedules and supplementary... [continues]
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