ACCTG215ClassNotes1-14-10.pdf ACCTG 215
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This 7 page One Day of Notes was uploaded by Shogo Okuda on Tuesday October 28, 2014. The One Day of Notes belongs to ACCTG 215 at University of Washington taught by Wells in Winter2010. Since its upload, it has received 111 views. For similar materials see Introduction to Accounting and Financial Reporting in Accounting at University of Washington.
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Date Created: 10/28/14
PREPARER TH USNESS ENTITY QRGANILATIQNAL FQRM Partnership don t pay taxes pay individually usually dissolve PROPRIETORSHIP PARTNERSHIP CQRPQRATQN STARTUF Agreement Corporate charter BUS LICENSE OWNERSHF Private Private Public or private see below TTLE Receipts Agreement Stock certificates OWNERSHP Same Shared Separate MANAGEMENT LIABILITY TO Unlimited Unlimited for Limited to OWNERS at least one investment EARNINGS Once at Once at Twice at corporate TAXED personal rates personal and personal rates rates TRANSFER OF Easy to Near to Easy OWNERSHF impossible impossible CAPITAL Small Medium Large FORMATION You got to comply with all the laws when ur corporation TYPES OF CORPORATIONS 39 Public Owned by government eg FDIC Private owned by individuals Nonstock doesn t exist eg church Stock exists Closed can t buy eg Professional LLC or Subchapter S Open can buy eg listed NYSE or unlisted OTC 0 WILLIAM WELLS 19892010 1 1152010 1 Hybrids Limited liability corporations beginning to emerge 2 If profit oriented if not exempt from taxation 0 WILLIAM WELLS 19892010 2 1152010 PREPARER THEUSINESS ENTITY continued BOARD OF DIRECTORS stock owner Majority must be independent 39 Board member or family member not employed within 3 years Non board related pay caps 6OK NASDAQ 100k NYSE Elected by common stockholders Organize according to interest areas Nominating Committee hirefire senior management Compensation Committee Audit Committee discussed with audit Executive Committee 39 Set strategic direction How where when do we want to growshrink Hire advisor investment banker to help analyze fund raising choices if needed Resources Borrow New stock Own operations Assets Liabilities Paid in Retained Capital Earnings Put together prospectusdebt agreement to attract funds Terms of issuance etc including audited financial statements 39 Submit for approval to SEC Corporation Finance Division Sold through underwritersbrokers Monitor progress toward goals direct corrective action as needed Declare dividends payable to stockholders Hold annual meeting with stockholders o WILLIAM WELLS 19892010 3 1152010 PREPARER TH USNESS ENTITY continued SENIQR MANAGEMENT Apply management expertise in using investedloaned funds operational focus increase in stock price Generate cash flow for payments to 1 Creditors interest and repayment of principal and 2 Owners dividends PREPARING THE FINANCIAL STATEMENTS Why prepare them Stewardship reports to owners and lenders Required by creditors as precondition to lendingadvancing credit Required by government for publicly traded corporations formally filed with the government later Conservatism CON2 prudent reaction to uncertainty is to consider risks and uncertainty inherent in business situations Prefer measurement errors tend toward understatement rather than overstatement of net income and net assets 39 MateriaIity Does quotthe magnitude of an omission or misstatement of accounting information that in light of the surrounding circumstances make it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatementquotCON2 Generally Accepted Accounting Principle Yes account for it per GAAP reportdisclose it separately No ignore GAAP combine don t disclose it Costbenefit are perceived benefits of accountingreporting per GAAP greater than the cost of complying with GAAP 3 z I The garbage can too small of cost 9 UW will treat it as expense few pennies year 39 ndustrz practice industry techniques may accountreport for eventscondition more informatively than GAAP 0 WILLIAM WELLS 19892010 4 1152010 PREPARER TH USNESS ENTITY continued ETHICS 39 The ethics of an organization person is the set of ground rules by which the organization person operates and evaluates 3 Can ethics be taught Only to an extent Ethics are something we absorb from K every authority that influences our lives Ethics are a part of one s identity Truly ethical people are a valuable commodity Men and women who adhered to high ethical standards during the previous decade found in general that their opportunities were enhanced If there s ever a question about whether something is ethical it probably isn t ethical Most people instinctively know whether an action is right or wrong While accepting lower ethical standards might solve a temporary problem it invariably backfires over the long term 4 39 Components of a good system of ethics Mission statement addresses an ethical end result Code of ethics developed by all is in place Supportedfollowed by top management Understood and willingly accepted by all employees 3 Definition developed by Dr Mark Pastin as reported in Journal ofAccountancy December 1990p87 4 Interview with Robert Half as reported in the Journal ofAccountancy May 1994 p 111 o WILLIAM WELLS 19892010 5 1152010 PREPARER TH USNESS ENTITY continued INTERNAL CQNTRCE ensure 39 Effectiveness and efficiency of operations 39 Compliance with applicable laws and regulations 39 ManagementAssessment of Internal Controls Section 404 Sarbanes Oxley Act SOX 2002 requires each annual report of an issuer to contain an 3939internal control reportquot which shall 1 state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting and 2 contain an assessment as of the end of the issuer39s fiscal year of the effectiveness of the internal control structure and procedures of the issuer for financial reporting Each issuer39s auditor shall attest to and report on the assessment made by the management of the issuer An attestation made under this section shall be in accordance with standards for attestation engagements issued or adopted by the Board An attestation engagement shall not be the subject of a separate engagement The language in the report of the Committee which accompanies the bill to explain the legislative intent states quot the Committee does not intend that the auditor39s evaluation be the subject of a separate engagement or the basis for increased charges or feesquot Code of Ethics for Senior Financial Officers Section 406 directs the SEC to require each issuer to disclose whether it has adopted a code of ethics for its senior financial officers and its contents a code is now required to be adopted Directs the SEC to revise its regulations concerning prompt disclosure on Form 8K to require immediate disclosure quotof any change in or waiver ofquot an issuer39s code of ethics o WILLIAM WELLS 19892010 6 1152010 PREPARER TH USNESS ENTITY continued jNCR MANAGEMENT A3TON 39 The public use those reports to make lendinvestother decisions 39 Decisions therefore incorporate the qualitycredibility of the reports and thus the ethics of management 39 Management prepares and is rewarded from financial reports Stupidity no real damage Illegal real damage Joe Window Dressing what damage 0 Interpretation of events 0 Timing of events 0 Selection between acceptable accounting techniques 0 WILLIAM WELLS 19892010 7 1152010
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