Professional Documents
Culture Documents
Financial Statements
A financial Statement is a formal record of
the financial activities of a business.
Financial Statement comprises of:
Reporting Profitability:
The Income Statement
Revenue
Expense
Income Statement
Example
Reporting Financial
Position: The Balance
Sheet and Related
Terms
The Classified
Balance
Ethics and
Sheet
Decision Making
groups together
accounts of similar
In todays business environment,
nature and reports
companies have to be aware
not
only
of
them in
a few
major
the economic impact of their
decisions, but
classifications.
also of their ethical impact.
Informat
ion
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Equity
To falsi
Current assets
Long-term
investments
Fixed assets
Intangible assets
Other assets
re
To igno
Current
ct
duLong-term
pro&
?
safety?
Retained Earnings
Contributed Capital
fy
records
??
Noncurrent
Assets
(All other
assets)
ASSETS
Current
Liabilities
(Paid with
Cash in 1 year
or less)
Noncurrent
Liabilities
(All other
liabilities)
LIABILITIES
11
Users of Accounts
Investors
Lenders
Creditors
Debtors
Government Bodies
Employee
Analyst
Public
The Conceptual
The grammar or terms, explaining financial
Framework
accounting
language in this chapter, are more formally
known as components of the conceptual
framework of accounting.
A resource of a business
Balance sheet
Liability
An obligation of a business
Balance sheet
Equity
Balance sheet
Contributed Capital
Balance sheet
Retained Earnings
Balance sheet
and statement of
retained earnings
Revenue
Income Statement
Expense
Income Statement
Dividend
A distribution of profits to
owners
Statement of
retained earnings
Definition
Ramification
Revenue
Recognition
Revenues are
The receipt of cash
recorded when they is not required to
are earned.
record a revenue.
Matching
Expenses are
recorded in the time
period when they
are incurred to
generate revenues.
Cost
Except in a few
cases, market
values are not used
for reporting asset
values.
Monetary unit
Time period
Going concern
Qualitative Characteristics
of Accounting Information
Term
Understanda
bility
Definition
Ramification
Accounting
information
should be
comprehensibl
e by those
willing to
spend a
reasonable
amount of
time studying
it.
Users must
spend a
reasonable
amount of time
studying
accounting
information for it
to be
understandable.
Relevance
The capacity
of accounting
information to
make a
difference in
Information
should have
predictive or
feedback value
and should be
Qualitative Characteristics
of Accounting Information
(continued)
Term
Reliability
Definition
Ramification
The extent to
which accounting
information can
be depended
upon to
represent what it
purports to
represent, both
in description
and in number.
Information should
be free from error,
a faithful
representation,
and neutral.
Comparab
ility
Entities must
disclose the
accounting
methods that they
use so that
comparisons
Qualitative
Characteristics of
Accounting Information
(Continued)
Terms
Definition
Ramifications
Consistenc
y
Accounting
information
should be
comparable
across different
time periods
within a
company.
An entity should
use the same
accounting
methods year to
year and
disclose when
they change
methods.
Materiality
The threshold
over which an
item could
begin to affect
decisions.
When an
amount is small
enough, normal
accounting
procedures are
not always
followed.
Qualitative
Characteristics of
Accounting Information
(Continued)
Definition
Terms
Conservatis When
uncertainty
m
exists,
accounting
information
should present
the least
optimistic
alternative.
Ramifications
An entity should
choose
accounting
techniques
that guard
against
overstating
revenues or
assets.
Purpose
Structure
Links to Other
Statements
Balance
sheet
Shows a
companys
assets,
liabilities, and
equity at a
specific point in
time.
Assets =
Liabilities +
Equity
The balance in
retained
earnings comes
from the
statement of
retained
earnings.
The balance in
cash should
agree with the
ending cash
balance on the
statement of
cash flows.
Income
statement
Shows a
companys
Revenue Expenses =
Net income/loss
goes to the
Purpose
Statement
of
retained
earnings
Statement
of cash
flows
(continued)
Structure
Links to Other
Statements
Shows the
changes in a
companys
retained
earnings over a
specific
period of time.
Beginning
Retained
Earnings +/Net
Income/Loss
- Dividends =
Ending
Retained
Earnings
Ending retained
earnings goes to
the balance
sheet.
Shows a
companys
inflows and
outflows of cash
over a specific
period of time.
Operating
Cash Flows
+/- Investing
Cash Flows
+/- Financing
Cash Flows =
Net change
in cash
Business Forms
Businesses have
three basic
options when
deciding which
form a new
business will take.
These include: sole
proprietorship,
partnership, and
corporation.
A Public Company
Corporations can take several forms, one
of which is a public corporation. A public
corporation is one in which ownership is
available to the public at large. Such
corporations are said to be publicly
traded. Examples of publicly traded
corporations are Tata, Infosys, and
Dabur.
The stock of a public corporation is usually
bought and sold on an open exchange such
as the Bombay Stock Exchange
Generally Accepted
Accounting Principles
Generally accepted
accounting principles
(GAAP) are the
accounting standards,
rules, principles, and
procedures that
comprise authoritative
practice for financial
accounting. These
principles have been
developed over time by
several
regulators.
SEBI
ICAI
Compa
nies
Act
International Accounting
Regulatory Bodies
Accounting is
practiced
throughout the
world, and there
is a movement to
develop one set
of international
accounting
standards to be
used by all
countries.
The IASB is a
board, similar to
the FASB, whose
mission is to
develop a single
set of high quality
international
standards
Those
requiring
standards,and
which
transparent
have both
comparable
similarities to
information.
and differences
from GAAP, are
called
International
Financial
Information Beyond
the Financial
Statements
Auditors Report
Third-party
assurance
Unqualifi
ed
opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bed
Bath & Beyond Inc. and subsidiaries as of February 28, 2009 and March 1, 2008, and the results of their operations and their cash flows for
each of the fiscal years in the three-year period ended February 28, 2009, in conformity with U.S. generally accepted accounting principles.
Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in the Notes to the consolidated financial statements, the Company changed its methods of accounting for the fair value
option for certain financial assets and financial liabilities and for fair value measurements in the fiscal year ended February 28, 2009 due to
the adoption of Statement of Financial Accounting Standards (SFAS) No. 159, The Fair Value Option for Financial Assets and Financial
LiabilitiesIncluding an amendment of FASB Statement No. 115 and SFAS No. 157, Fair Value Measurements. Further, as discussed in
the Notes to the consolidated financial statements, the Company changed its method of accounting for uncertain tax positions in the fiscal
year ended March 1, 2008 due to the adoption of the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes
an Interpretation of FASB Statement No. 109.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys
internal control over financial reporting as of February 28, 2009, based on criteria established in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated April 28, 2009 expressed
an unqualified opinion on the effectiveness of the Companys internal control over financial reporting.
KPMG, LLP.
Managements Discussion
and Analysis (excerpt)