Objective of Financial Accounting
• The objective of financial accounting is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers.
• In America, it has 10 elements of financial statements.
Assets Liabilities Equity (or net assets) Investments by owners 业主投资 Distributions to owners 业主派得 Comprehensive income 综合收益 Revenues Expenses Gains 利得 Losses 损失
– Net operating cash flow=cash receipts-cash disbursement 净经营性现金流量=现金收入-现金支出
– NOCF>0
– A major drawback: over short periods of time, operating cash flows may not be indicative of the company’s long-run cash-generating ability. 企业短 期的经营性现金流量可能不能很好反映其长期获取现金的能 力。
Financial Accounting Environment • Providers of financial information
Profit-oriented companies Financial accounting
Not-for-profit entities Governmental and nonprofit accounting
Qualitative Characteristics
Decision usefulness
Overriding objective
Relevance 相关性
Faithful representation 如实反映
Primary characteristics
Qualitative Characteristics of Financial Reports
Relevance 相关性
Faithful representation 如实反映
Predictive Value
预测价值
Confirmatory Value
ቤተ መጻሕፍቲ ባይዱ验证价值
Completeness 完整性
Free from material error
无重大错报
Neutrality 中立性
Qualitative Characteristics of Financial Reports
recorded when incurred. – Net income=revenues-expenses 净利润=收入-费用
（or net loss if expenses are greater than revenues.） – Net income ≠ Net operating cash flow
Materiality 重要性 Dollar amount of an item (bad debts) Nature of an item (unlawful transaction)
• One practical justification: 一个实务判断
Conservatism 谨慎性
Elements of Financial Statements
Elements of Financial Statements
• Equity (or net assets)
– shareholders’ equity or stockholders’ equity – residual interest 剩余权益 (equity=assets-liabilities). – Exp. We open a new company. Its total assets are
Cash Basis Accounting
Accrual Basis Accounting
• Accrual Basis Accounting
– One of the accounting methods – Revenue is recorded when earned, expenses are
Accrual Basis Accounting
Exercise
• The company incurred utility costs of $35,000 in year one, and the insurance covers a three-year period.
Qualitative Characteristics of Financial Reports
Managerial Accounting
Financial Accounting Environment
• Financial information: financial statements and related disclosure notes
• Financial statements:
• Who: Reporting entity • Do what: Provide financial information (useful in
decision-making) • To whom: Capital providers
Objective of Financial Accounting
Households
Financial Accounting Environment
• Users of financial information (external)
Investors
Primary users
Creditors (banks, bondholders)
Employees
Labor unions
Customers
Suppliers
Government regulatory agencies (Securities and Exchange Commission)
Financial intermediaries (financial analysts, creditrating organizations…)
可验证性
及时性
Enhancing
characteristics
Understandability 可理解性
Constraints to Achieving Qualitative Characteristics
• Two constraints: 两个约束条件
Cost Effectiveness 成本效益原则 Segment report
a. Balance sheet or statement of financial position b. The income statement or statement of operation c. The statement of cash flows d. The statement of shareholders’ equity
Elements of Financial Statements
• Assets
– Future economic benefits – Obtained or controlled 拥有或控制
Our company purchased a building. (obtain) Capital lease (control) – Past transactions or events Our company is planning to purchase an
Financial Accounting Environment
• Users of financial information (external)
Financial Accounting
• Users of financial information (internal)
Managers, CFO, CEO the board of directors
Relevance 相关性
Qualitative Characteristics
Overriding Decision usefulness objective
Primary characteristics
Faithful representation
如实反映
Comparability 可比性
Verifiability Timeliness
Financial Accounting Environment
• The primary focus of financial accounting is on the information needs of investors and creditors.
Who provides financial information? Who uses financial information? Financial accounting & managerial accounting What is financial information?