Homework assignment Accounting

Week 2 learning team assignment

Respond to the following questions in approximately 500 words (total words for the assignment): 

In what ways do the elements (numbers) in the four financial statements interact with one another?

  Comment by Trent Green:

How might changing one of the financial statements affect the other financial statements? ( This is my portion only, the financial statements that's being analyzed are *net income,retained earnings, operational expenses and common stock)

 

Why is it essential to understand the relationship between the financial statements?

 

For the week 2 LT paper, you need to answer the questions on the relationships between financial statements that is stated in the syllabus.  The first question is: "In what ways do the elements of the four financial statements interact with one another?"   This is a relationship between numbers question.  One systematic way to approach the question is to start listing the combinations of numbers that agree directly between the statements.  For example,

Balance sheet related to cash flow:

1.  The year end cash balance on the balance sheet is also the ending cash balance on the cash flow.

2.  The prior year ending cash balance on the balance sheet is also the beginning cash balance on cash flow.

These are just examples.  There are many relationships between the numbers on the balance sheet and the cash flow statement.  You can list the possible combinations of two statements (e.g. balance sheet, to income statement, cash flow and statement of changes in stockholders' equity; income statement to cash flow and changes in stockholders' equity and so on) and then identify as many interactions as possible.  In this manner, I can identify dozens of direct relationships and agreements of amounts between the various statements.  The team needs to provide at least four examples not including the two examples I gave above.

 

For the second question, you need to provide a numbers example and describe the flow of a misstatement through the four statements.  For the third question, answer it from the perspective of management or an investor.

This assignment does not have to meet APA requirements.  Please include a title page with identifying information for the team and double space the assignment so I can insert comments. 

 

The word count of 500 words is a minimum but I do not penalize you if you exceed the word count unless it is extreme.  Please ask any questions in this thread.