Analyzing Financial Ratios

Topics: Balance sheet, Income statement, Generally Accepted Accounting Principles Pages: 21 (6293 words) Published: March 26, 2013
The Terry Project:
Creating and Modifying the Financial Statements

Acct 315 Project
Instructor: Dr. Jason Porter

Most college courses in accounting focus on teaching the various components of the accounting system. While this is an effective way to learn and master each of the various components, it usually leaves students with only a vague notion of how those components work together. My goal is to bridge that gap using the Review Project and this Terry Project. The goal of the Review Project is to take you through the full accounting cycle, allowing you to practice each step and use it as you move on to the next step. This project, on the other hand, will help you to consider a series of individual situations, how they should be accounted for and what each will do to the company’s bottom line. Basically, this project has three goals: 1) to give you practice with at least one of the important topics we will cover in each chapter; 2) to encourage you to consider the consequences of business decisions on the financial statements; and 3) to provide you with an opportunity to work with a small group or partner to solve accounting problems. To accomplish the first goal, I have provided you with some basic information about the financial accounts already prepared by Terry Co. For most of the chapters we cover, I will give you information about at least one transaction that Terry’s accounting department has not yet recorded. It will be up to you to determine whether any adjustment needs to be made because of this new information. If so, then you will need to make the appropriate journal entries (including any tax effects). To accomplish the second goal, each assignment will require to you create or adjust Terry’s financial statements based on your adjusting entries. In most cases, you will then have the opportunity to look at several commonly used financial ratios to determine what effect your changes will have on investors’ opinion of Terry Co. To accomplish the third goal, you will work with a partner (or partners, depending on the class size) of your choice. Because of the way the system is set up for grading, once you have set up your Terry teams you will have to continue with that team for the rest of the semester. Your choice of partner is due at 5:00pm on the due date given in the course schedule. If necessary, you may use the Terry Groups discussion link in Blackboard to help you find a partner. You will have an opportunity to evaluate your partner at the end of the semester. These evaluations will be an important part of your grade on this assignment, so make sure that you are a team player. For those of you who are accounting majors, this project will provide you with some experience in the types of activities you will be doing throughout your professional careers: making journal entries, fixing financial statements, recognizing the effects of certain decisions of the financial statements, and discussing those effects with others.

For those of you who are majoring in other areas, this project will provide you with some perspective on how your business decisions will affect the way investors, creditors, and other outside stakeholders see your company. Remember that most investors see only the financial statements, so you must impress them with those numbers if you are to get the funding you need. Since GAAP is relatively strict on how information must be reported once the transaction has been performed, you will need to know the financial statement effects of your options before you make your decision. This project will help you get a feel for how various decisions will affect the financial statements and the financial ratios. Finally, remember that accounting is not only important, it’s also fun! And this project has been written to give you lots of opportunities for fun. Grading

Each part of the project will be worth 25 points. The journal entries, if any are needed, will be...
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