Wednesday, May 31, 2023
Accounting: The Language of Business - Vol. 2 (Intermediate: Part 74)
Never measure literature by accounting statistics. A quarter of working authors earn less than $1,000.
Statements of Financial Position and Cash Flows and the Annual Report (Part L)
by
Charles Lamson
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Financial Statement Articulation Financial statement articulation, the relationship among financial statements and financial statement elements, is a critical concept in understanding financial statements. The elements of the four basic financial statements are intrinsically interrelated:
Exhibit 6.11 provides an overview of financial statement articulation. EXHIBIT 6.11 Financial Statement Articulation %20(1)%20(1).jpg) Click to Enlarge.  Exhibit 6.12 illustrates financial articulation using the 2016 Johnson & Johnson financial statements.
EXHIBIT 6.12 Johnson & Johnson Financial Statement Articulation (in millions), Financial Statements, for Year Ending January 1, 2017 %20(2)%20(1).jpg)  EXAMPLE 6.3 Financial Statement Articulation PROBLEM: Complete the following financial statement articulation exercises.
SOLUTION: %20(1).jpg) .jpg) *GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 252-255* end |
Tuesday, May 30, 2023
Monday, May 29, 2023
Sunday, May 28, 2023
Saturday, May 27, 2023
Friday, May 26, 2023
Accounting: The Language of Business - Vol. 2 (Intermediate: Part 73)
Even before he came to power in 1997, Gordon Brown promised to change the accounts to parliament from simple litanies of cash in and cash out, to a more commercial system that took notice of the public property the departments were using. This system is known as resource accounting.
Statements of Financial Position and Cash Flows and the Annual Report (Part K)
by
Charles Lamson
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EXAMPLE 6.1 Operating Cash Flows: and Direct Method PROBLEM: Walker Welding Company provided you with the following information for the current year: %20(1)%20(2).jpg) %20(1)%20(1).jpg) Compute net cash flow from operating activities for Walker Welding under the indirect reporting format. SOLUTION: The indirect method requires applying a series of adjustments to net income to arrive at net cash flow from operating activities. We first add back depreciation expense because it is a noncash expense. That is, depreciation is an expense deducted on the income statement reducing net income, but it does not use cash.  Because accounts receivable increased by $6,000 during the year, Walker Welding did not collect all of its sales. As a result, we subtract the increase in accounts receivable from net income to determine the cash collected from customers. Accrual-basis expense is recognized at the same time that the accounts payable is recognized. However, if accounts payable increase, this indicates that Walker Welding has not yet paid the balance. Therefore, less cash is paid for expenses than reported under the accrual basis on the income statement. So, we add the increase in accounts payable back to net income to reflect the cash paid for these expenses. The accrual-basis income tax expense is recognized at the same time that the income taxes payable is reported. Because the payable balance decreased, Walker Welding actually paid more for income taxes than it recorded as expense this year. In other words, the company paid all of this year's taxes and the remaining liability from last year. Thus, its cash-basis tax expense was higher than its accrual-basis tax expense, and we deduct the decrease in income tax payable from net income to arrive at operating cash flow.  Walker's operating activities section of the statement of cash flows follows. %20(1)%20(1)%20(2).jpg) Indirect Method: International Financial Reporting Standards (IFRS). Under IFRS a company can begin its reconciliation to operating cash flows with other income numbers, such as income before taxes or operating income. Direct Method of Reporting Cash Flows from Operating Activities. Under the direct method (also referred to as the income statement format) for reporting cash flows from operating activities, companies report actual cash inflows and outflows in the operating section of the statement of cash flows. That is, instead of presenting a reconciliation between net income and net operating cash flows, a company converts each individual income statement line item from the actual to the cash basis.  The FASB prefers the direct method because the cash receipts and cash payments approach is easy to understand. EXAMPLE 6.2 Operating Cash Flows: Direct Method PROBLEM: Using the information provided by Walker Welding Company, compute net cash flow from operating activities using the direct reporting format. SOLUTION: The direct method uses the same adjustments as the indirect method but applies the adjustments to each income statement line item, as Illustrated in the following computations. %20(1)%20(1).jpg)  We are now able to prepare the operating activities section under the direct method. %20(3)%20(1)%20(2).jpg) *GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 251-252* end |
Thursday, May 25, 2023
Wednesday, May 24, 2023
Tuesday, May 23, 2023
Monday, May 22, 2023
Sunday, May 21, 2023
Accounting: The Language of Business - Vol. 2 (Intermediate: Part 72)
The SEC does way more good than harm - the last thing I would do is get rid of the SEC...if accounting were thoroughly fixed, a lot of other sins would go away. We're paying a huge price for deterioration of accounting.
Statements of Financial Position and Cash Flows and the Annual Report (Part J)
by
Charles Lamson
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Format For Cash Flows from Operating Activities There are two acceptable formats for cash flows from operating activities:
The only difference between the statement of cash flows under the direct and indirect methods is reporting cash flows from operating activities. The investing and financing sections of the direct and indirect reporting formats are the same. The Financial Accounting Standards Board (FASB) prefers the direct method, but it is the least popular in practice---it is used by only 1% of U.S. companies [AICPA, Accounting Trends and Techniques - 2012 (New York, NY: AICPA, 2012)]. We begin our discussion by presenting operating activities under the indirect method. The Indirect Method of Reporting Cash Flows from Operating Activities. The indirect method (also referred to as the reconciliation format) begins with net income from the income statement [For more info about the income statement, see "Accounting: The Language of Business (Part 8)]" and then reconciles the net income to net cash generated from operating activities. Reconciling items are separated into two groups:
 Exhibit 6.9 lists a few of the common adjustments or reconciling items. EXHIBIT 6.9 Reconciling Items for the Indirect Method %20(2)%20(1).jpg) Exhibit 6.10 provides the operating activities section of Johnson & Johnson's statement of cash flows using the indirect method. Note that the first line in the operating section is net income, followed by the adjustments for noncash items such as depreciation and bad debt expense (referred to in the exhibit as "accounts receivable allowances"). Although depreciation expense and bad debt expense are deducted on the income statement, they are not cash outflows. Thus, Johnson & Johnson must add them back to net income to arrive at net operating cash flows. EXHIBIT 6.10 Statement of Cash Flows, Operating Activities, Johnson & Johnson, Financial Statements, for the Year ended January 1, 2017  Click to enlarge. Source: https://www.investor.jnj.com/annual-meeting-materials/2016-annual-report Next, Johnson & Johnson adjusts for changes in operating assets and liabilities such as accounts receivable and accounts payable. Other common operating asset and liability adjustments are for inventory, prepaid expenses, and accrued liabilities. .jpg) To illustrate changes in operating assets and liabilities, consider accounts receivable. Assume that NRR Company reported accounts receivable of $10,000 and $12,000 at the beginning and end of the year, respectively. The company also reported $55,000 in sales revenue. The increase in accounts receivable indicates that $2,000 of this year's sales were not collected. As a result, NRR collected $53,000 from customers ($55,000 - $2,000). Therefore, NRR subtracts the increase in accounts receivable ($2,000) from net income to arrive at net cash provided by operations. *GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 249-251* end |
Saturday, May 20, 2023
Friday, May 19, 2023
Thursday, May 18, 2023
My Trip to McNair Park in St. Charles, Missouri, USA
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| Yesterday, I took a trip to McNair Park in St. Charles, Missouri, USA, and took some photos for the St. Charles Parks Photo Contest. However, I did not take the above photo, because I was running short on time, and did not get a chance to get up to the entrance to get a shot. I got it from the McNair Park website, which can be accessed by clicking the above link. McNair is divided into two sections divided by a creek and surrounding woodland area. The smaller section north of the creek is the "Day Camp" area of the park, and the larger south section is the "Main Area." A unique amenity to McNair Park is the the Braille Trail and Garden located at the southwest corner of the park. You may notice a lot of haze in the air in these pictures. That is from the forest fires in Canada. I didn't even notice it until I got home and started looking at the pictures, and heard people talking about it on the local news. Below is a video I created of my trip. Out on the Town with Big Chuck from St. Charles (Episode 6): My Trip to McNair Park |
  This is a shot of the McNair Braille Trail and Garden Area located in the southwest part of the Main Area of the Park.   Here is a cozy spot to sit and relax and forest- bathe on the Braille Trail.  Here's another beautiful spot in the garden at McNair Park.   This is a shot of the bridge that crosses the creek, that divides the north and south sections of the park.   And here we have a shot of the handicap parking on the northern Day Camp Area of the park. I know it is just a shot of a parking lot, but I thought it was very visually appealing, and worth taking a photo.  Love this one with the statue of the two patriotic kids playing with the purple flowers in the foreground and the beautiful white blooms on the dogwood tree in the background. This is probably my favorite shot of the day. This is also in the northern Day Camp Area of the park.  This pavilion is a nice spot to come back to and have a little party. It is located in the southern main area of the park. end |
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Measurement Methods by Charles Lamson There are two major measurement methods: counting and judging. While counting is preferre...
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Product Life Cycles by Charles Lamson Marketers theorize that just as humans pass through stages in life from infancy to death,...
