ACCT 1.16.25

Access and Registration for ALEKS

  • Two weeks access provided while waiting for delivery of codes included in the packet.

  • Instructions for obtaining ALEKS courtesy access posted on Canvas, referred to as financial aid access code.

  • Completing the specific steps will ensure registration for the appropriate ALEKS class.

  • Once the permanent access code is received, it can be inputted for ongoing access for the rest of the semester.

Class Activities and Due Dates

  • Students are encouraged to ask questions regarding the conceptual framework, worksheet, take-home quiz, etc., toward the end of the current class.

  • Completion of a student information sheet is required for participation points; due by next Tuesday.

  • Initial assessment in ALEKS is due at the end of next week; students urged to complete this as soon as possible.

  • An ethics memo is due on the Monday following next week; discussions on this memo to take place next week.

  • Initial assessment deadline has been extended until the end of next week.

Financial Accounting Fundamentals

  • Objective of financial accounting: to provide useful information to external decision makers, such as investors and creditors.

  • Key financial statements discussed include:

    • Balance Sheet

    • Income Statement

    • Cash Flow Statement

  • Elements of financial statements:

    • Assets

    • Liabilities

    • Equity (included on the Balance Sheet)

    • Revenues

    • Expenses

    • Net Income (included on the Income Statement)

  • Importance of understanding the core documents that present financial information.

General Accounting Principles (GAAP)

  • GAAP refers to the generally accepted accounting principles guiding accounting practices in the United States.

  • GAAP has been evolving for centuries, adapting to changes in business practices and regulations over time.

  • The Financial Accounting Standards Board (FASB) is the body primarily responsible for establishing GAAP.

  • The Securities and Exchange Commission (SEC) has ultimate authority over accounting regulations and oversight.

  • Important legislative acts influencing accounting standards:

    • Securities Exchange Act of 1934 (seminal legislation for business regulation).

    • Sarbanes-Oxley Act, which introduced significant reforms to enhance corporate governance and prevent accounting fraud.

Conceptual Framework for Accounting

  • The conceptual framework acts as an accounting constitution, establishing the foundations upon which accounting principles and practices are built.

  • Developed primarily in the 1960s and 1970s, the framework provides structure to the often-changing landscape of accounting standards.

  • This framework aims to generate uniformity among accounting rules and reduce inconsistencies in financial reports.

Framework Objectives and Elements

  • Primary purpose of the conceptual framework: to provide relevant information for decision making by investors and creditors.

  • Importance of how different aspects of the framework interrelate and influence each other.

  • Key principles include:

    • Relevance: Information must have the capacity to influence decisions; includes predictive and confirmatory value.

    • Faithful Representation: Information must accurately reflect the financial situation; must be free from error and bias.

Exercise One-Six: Financial Statement Elements

  • The exercise is designed to help students identify elements of financial statements:

    • Assets: Resources owned by a company that are expected to bring future economic benefits.

    • Liabilities: Obligations of the company requiring future sacrifices of assets.

    • Equity: The residual interest in the assets of the company after deducting liabilities.

    • Revenue: Income generated from normal business operations.

    • Expenses: Costs incurred in generating revenue.

    • Comprehensive Income: Includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

    • Gains/Losses: Increases or decreases in equity from non-owner sources (e.g., selling equipment at a gain).

Group Activities and Participation

  • Students engaged in activities to build familiarity and relationships; participation points are awarded based on contributions.

  • Collaborative exercises emphasizing the conceptual framework and gathering information on statement elements.

  • Creation of name tags and note cards for attendance and active participation in discussions.

Connection to Financial Decision Making

  • Understanding assets, liabilities, equity, and relevant financial documents informs investment decisions.

  • The historical financial performance of a company guides future investment considerations, although predicting future outcomes remains challenging.

  • Discussion on how stakeholders assess overall company stability and performance through financial data, focusing on expected dividends and historical profitability.