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 analyzing Ventura financial 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
References: Kimmel, P., Weygandt, J., & Kieso, D. (2007). Financial Accounting: Tools for Business Decision Making (4th ed.). Hoboken, NJ: Wiley. Williams, J., Haka, S., & Bettner, M. (2005). Financial and Managerial Accounting: The Basis for Business Decisions (13th ed.). Boston, MA: McGraw Hill.