Financial Statement Presentation And Disclosure Of Revenue Generating Activities

Publicly traded companies are subject to the reporting and disclosure requirements of the Securities Exchange Commission (SEC). The laws that govern the securities industry were established to provide transparency to investors, creditors and shareholders alike. According to Hoyle, Schaefer & Doupnik, (2015) there are seven major disclosure requirements, the first being a five-year summary of operations to encompass sales, assets, income from continuing operations. Followed by a description of business activities, a three year summary of industry segments to include foreign and domestic operations, a list of company directors and executives, quarterly market price of common stock for the last two years, restrictions on the company’s ability to continue paying dividends, and finally, an analysis of the company’s financial condition, changes in the conditions and results of operation.

(Ohara, 2007) Most financial statements are made public for the benefit of stakeholders and potential investors. The bottom-line is that financial statements are the main source for analyzing how well a company is operating. The income (or profit and loss) statement is simply a report card of how much activity (revenue) was performed in the period, how profitable that activity was (gross profit/loss), and what it cost the contractor to run the business (overhead). (Murphy, 2006)

Describe three examples of transactions that would affect a firm's income statement. For each transaction, identify if the transaction has a positive or negative effect on the firm's net income. Revenues is the amount of money a company receives for goods or services rendered. This type of transaction has a positive effect on net income. Expenses are costs that a business obtains through its operations to earn revenue. This has a negative effect on net income. Profit is a financial gain after expenses and revenues are taken into account. This has a positive effect on net income.

Entity-wide disclosures are required under Accounting Standards Codification (ASC) 280-10-50-40 through 280-10-50-42. The disclosures are required because every corporation does not report information in a similar fashion, and the disclosures would provide comparability of the financial statements among entities. For example, if a corporation uses a geographic approach in its financial statements, disclosing certain information about the products or services sold will make comparability to other companies much easier. The disclosures will also help with comparability within an entity if they decide to choose another method of reporting operating segments in the future. There are three types of entity-wide disclosures; products and services, geographic areas, and/or major customers. Every public company has to comply with the disclosures, even if the company has one reportable segment. The only exception to the entity-wide disclosures is if it is impractical to provide the information, such as it would be extremely costly to the corporation, or if the “internal reporting systems are not capable of gathering financial information by product or service by geographic area.” A disclosure should be made when entity-wide disclosures are impractical.

Identify each of these transactions as a deferred revenue, deferred expense, accrued revenue, or accrued expense.

CLASSIFICATION AND UNDERSTANDABILITY- FINANCIAL INFORMATION IS APPROPRIATELY PRESENTED AND DESCRIBED AND DISCLOSURES ARE CLEARLY EXPRESSED .

accounting? Be sure to identify any other issues that must be resolved to determine how revenue

GAAP stands for Generally Accepted Accounting Principles. This is a key component to know in any business. GAAP is based on established concepts, objectives, standards and conventions to guide how financial statements are prepared and presented. GAAP’s objective is to provide information that is useful to investors, lenders, or others that provide resources to a company or not-for-profit organization. GAAP includes principles on a few things. One is recognition. Recognition is defined as what items are to be listed on the financial statements. This includes assets, liabilities, revenues and expenses. The next is measurement. This refers to the amounts that need to be reports of each part of the financial statement. Another is presentation. This refers to what is displayed and listed on the statement and how they are organized. And lastly there is disclosure. This includes the specific information that is the most important to the people that utilize the financial

When organizations present financial statements for review, the information contained in the statements should be appropriate and clear enough as to enable evaluators or auditors of the information to make accurate estimations of the presenting organization’s financial status.

In order to help users of financial statements better understand the public entity 's operations and make more informed decisions about the public entity 's operating matters, publicly-held companies are required to disclose the segments and related information about the different types of activities in which the company engages and the different economic environments in which the company operates. According to FASB Accounting Standards Codification, public entity is a business entity or a not-for-profit entity that issues securities in public market or is required to files financial statements with SEC. FASB provides guidance regarding the disclosure in the notes to financial

Current standards for revenue recognition are set forth under Concepts Statement No. 5, Recognition and Measurement in Financial Statements of Business Enterprises (which were codified in Subtopic 605-10,

Financial statements of the company are significant for the investors who would like to venture into the business operation. It gives them the insight whether the business is making profits or it is doomed to fail;

“To state the facts frankly is not to despair the future nor indict the past. The prudent heir takes careful inventory of his legacies and gives a faithful accounting to those whom he owes an obligation of trust”, John F. Kennedy. In this quote, Kennedy expresses that the ultimate goal of finance is to gain trust from those who can help capitalize on the organization. Most importantly, it states that transparency and honesty are the best indications for building that trust. The need for trust is equally valid and critically important for healthcare organizations. As the healthcare industry grows, so does the policies and procedures for accurate and transparent accounting. Therefore, healthcare

Revenue Recognition is a widely debated topic amongst businesses and entities when it comes to preparing financial statements. Generally, companies tend to recognize their revenue when it is earned; however, this process does tend to vary depending on the company’s point of view. The FASB Codification outlines this process in detail and provides guidelines to companies that come across any issues when recognizing revenue.

CHAPTER 18 REVENUE RECOGNITION MULTIPLE CHOICE—Conceptual Answer​No.​Description ​c​1.​Revenue recognition principle. ​b​2.​Definition of "realized." ​a​3.​Definition of "earned." ​d​4.​Recognizing revenue at point of sale. ​d​5.​Recording sales when right of return exists.