costa company and General Mills

Introduction to Financial Accounting

Accounting is the language of business

We have strict standards for external reporting to provide comparability and consistency of the financial information disclosed. Internal or managerial accounting is different and used as a tool for planning and decision making. The major differences of the two types of accounting can be summarized as follows.

Financial Accounting

Managerial Accounting

Generally Accepted Accounting Principles (US GAAP)

No required rules or standards

Standardized financial statements (balance sheet, income statement, and statement of cash flows)

Budgets, cost reports, performance reports, and types of special analysis

Emphasis on historical data

Emphasis on future data

External users

Internal users

Generally Accepted Accounting Principles (GAAP) refer to the standards promulgated by the Financial Accounting Standards Board (FASB). All U.S. publicly held companies and other companies audited by external auditors must adhere to these standards. Publicly held companies must file a number of reports with the Securities and Exchange Commission (SEC) including quarterly and annual financial statements. These statements are typically released to the public and published on the corporate website. The annual report is traditionally associated with the release of financial information to the public.

The four financial statements required by US GAAP are:

•The income statement

•The balance sheet (or statement of financial position)

•The statement of cash flow

•The statement of retained earnings

The IASB (International Accounting Standards Board) issues IFRS (International Financial Reporting Standards). These standards are embraced worldwide. FASB and IASB are currently working on a convergence project.

The Profession

The American Institute of Certified Public Accountants (AICPA) states on its homepage (http://www.aicpa.org/Career/CareerPaths/Pages/CareerPaths.aspx) that the below specializations are available career paths to a certified public accountant (CPA).

•Forensic and Valuation Services Taxation

•Fraud Prevention, Detection & Investigation

•Audit

•Business and Industry

•Government

•Personal Financial Planning

•PrimePlus/ElderCare

•Employee Benefit Plan Audit

•Information Technology (IT)

For further information about the CPA profession and rules for licensing go to the websites for AICPA or the National Association of State Boards of Accountancy (NASBA).

Required Background Material

Baruch College - The City University of New York (CUNY). (2008) Guide to Financial Statements. Retrieved from http://www.baruch.cuny.edu/tutorials/statements/view_tutorial.html

This is a 45-minute interactive video presentation with audio. It is an excellent introduction and overview of financial statements. You do not have to watch the whole presentation at one time since it is easy to restart at different points. The information is also available in a PDF file.

Securities and Exchange Commission (SEC). (2007). Beginners' Guide to Financial Statements. Retrieved from http://www.sec.gov/investor/pubs/begfinstmtguide.htm

Walther, L. (2012). Principles of Accounting. Chapter 1. Retrieved from http://www.principlesofaccounting.com/

Below are two introductory videos by the author of Principles of Accounting (2011). Note that there are five videos associated with Chapter One in Dr. Walther's textbook. They are all useful, so feel free to watch them all. Readings from this textbook will be assigned for future modules and each chapter has at least one video associated with it.

Walther, L. (2010, March 5). Financial and Managerial Accounting Information, Chapter 1 [Video file] Retrieved from the playlist at http://www.youtube.com/user/larrywalther/videos?view=pl

Walther, L. (2010, March 6). The Four Core Financial Statements, Chapter 1 [Video file] Retrieved from the playlist at http://www.youtube.com/user/larrywalther/videos?view=pl

Walther, L. (2010). Financial Statement Analysis. Chapter Sixteen. Retrieved from http://www.principlesofaccounting.com/

Module 1 - Case

Introduction to Financial Accounting

Assignment Overview

General Mills

http://www.generalmills.com

Meiji Holdings Co., Ltd.

http://www.meiji.com/english/corporate/data/group/

Required:

Go to each company’s website, review the most recent financial statements for the company, and then answer the following questions.

•What accounting standards are used?

•What auditing standards are used by the external auditors?

•Analyze and comment on the differences in the annual statements found on the companies' websites. Provide a few specific differences in content and format.

•Explain and illustrate the difference between an annual report, a 10-K, and a Corporate Social Responsibility Report. Comment on the type of reports issued by both companies.

•How comparable are these financial statements?

Prepare a table for a period of three years showing some key financial information for the two companies. Include at least four items from the balance sheet, four items from the income statement, and four items from the statement of cash flow. Having reviewed and analyzed the financial information, please elaborate on the following three questions:

1.Which one of the two companies is the most profitable?

2.Compare growth of revenues vs. income over time and between the two companies.

3.How can you explain the difference in profitability between the two companies?

4.Indicate in detail the information you used to answer the above questions.

Assignment Expectations

It is important to answer the questions as posed. The discussion should be 4 to 6 pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet software when computations are involved.

Upload your completed assignment.

Module 1 - SLP

Introduction to Financial Accounting

Costa Company

In the first Case you had the opportunity to review the financial statements of two companies and make some comparisons. This course is not about preparing financial statements, but some practice helps explain the concepts and solidify the understanding of basic concepts. As part of this first SLP, you will have the opportunity to acquire some hands-on experience by creating a simple income statement and balance sheet. You will use the information provided below for Costa Company for this application. Future SLP applications will be based on the company of your choice.

Below find a working trial balance for Costa Company. This format is often used during the preparation phase of the financial statements since it provides a good overview. The Module 2 Background information has a very simple example, which may be helpful.

Costa Company

31-Dec-14

Trial Balance (accounts in alphabetical order)

Accounts

Working Trial Balance

Balance Sheet

Income Statement

Debit

Credit

Debit

Credit

Debit

Credit

Accounts payable

$14,500

Accounts receivable

$18,000

Cash

41,500

Common stock

10,000

Depreciation expense

18,250

Cost of goods sold

402,610

Equipment (net of depreciation)

325,000

Insurance

1,500

Inventory

80,500

Long-term debt

105,000

Marketing

5,600

Misc. expenses

4,500

Paid-in capital

90,000

Property taxes

6,500

Rent

22,000

Retained earnings

156,400

245,500

Revenues

619,400

Salaries

61,940

Utilities

7,400

Total

$995,300

$465,000

$530,300

$619,400

Net Income $89,100

Required:

Your task is to prepare an income statement and a balance sheet in good format after adjusting for the two errors below.

•A physical count of inventory indicates $84,200 on hand.

•There’s a check for $15,000 from a customer that has not been recorded in the working trial balance. The sale was never recorded in the first place, so the transaction relating to this sale is missing.

In addition:

1.Describe the effect of the errors on the income statement and balance sheet.

2.Is this company profitable? How do you determine whether or not this is the case?

3.Is the company in a solid financial position? (Comment on balance sheet.)

Support your conclusion with information from the financial statements.

SLP Assignment Expectations

Always include the name of the organization(s), time period covered, and source of information. It is important to answer the questions as posed. The document should be 2 to 4 pages and written in a clear and concise manner. Do not forget to include tables as required. Support your discussion or tables with references in APA format. You are encouraged to use Excel or other compatible spreadsheet software when computations are involved. You can turn in the spreadsheet instead of the Word document. The content should be equivalent to the page length suggested for a word processing document.

Module 1 - Outcomes

Introduction to Financial Accounting

•Module ◦Interpret financial statements.

•Case ◦Identify the parts of the financial statements.

•SLP ◦Prepare a simple balance sheet and an income statement.

•Discussion ◦Differentiate among various standard-setting bodies.

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