UNIT 13: ACCOUNTING AND FINANCIAL STATEMENTS

  1. What is management’s responsibility for the financial statements?

    Ultimately responsible for the preparation and presentation of the financial statements

  2. Limitations of the balance sheets:

    • Does not employ market values in measuring economic resources and obligations

    • Many unrecorded assets and liabilities, such as human capital

    • Many of the accounts reported are based on estimates as opposed to determinable amounts

  3. Why is the cash flow statement useful to the users of the financial statements?

    • Sumarises cash inflows and outflows for a firm over a period of time

    • Used to explain the change in cash and cash equivalents

    • Useful in explaining and reconciling many other significant changes in balance sheet items

  4. What is financial statement articulation?

    • The interaction btw assets, liabilties and equity elements with revenues and expenses

    • The relationships among financial statements and financial statement elements