《Survey of accounting 2th会计学 Carl S.Warren》ch02.pptVIP

Describe the advantages and disadvantages of the cash basis of accounting. 6 Learning Objective The primary advantage of the cash basis of accounting is its simplicity. The primary disadvantage of the cash basis is that revenues and expenses may not be properly matched on the income statement. Describe and illustrate how vertical analysis can be used to analyze and evaluate a company’s performance. 7 Learning Objective Statements can be compared by computing a percentage of each item within a statement to a total within the statement. This type of analysis is called vertical analysis. Vertical Analysis—Balance Sheet Assets: Cash and cash equivalents $ 307,785 Short-term investments 25,450 Accounts receivable 239,885 Inventories 278,981 Property, plant, and equipment 684,379 Other assets 229,168 TOTAL ASSETS $1,765,648 $307,785 $1,765,648 17.4% * Electronic Presentation by Douglas Cloud Pepperdine University Carl S.Warren Survey of Accounting Task Force Clip Art included in this electronic presentation is used with the permission of New Vision Technology of Nepean Ontario, Canada. The Cash Basis of Accounting Chapter 2 1. Describe the basic elements of a financial accounting information system. 2. Describe the cash and accrual bases of accounting. 3. Use the cash basis of accounting to analyze, record, and summarize transactions for a corporation’s first period of operations. 4. Use the cash basis of accounting to prepare financial statements for the first period of operations. Learning Objectives After studying this chapter, you should be able to: Continued 5. Use the cash basis of accounting for recording transactions and preparing financial statements for a second period of operations. 6. Describe the advantages and disadvantages of the cash basis of accounting. 7. Describe and illustrate how vertical analysis can be used to analyze and evaluate a company’s performance. Learning Objectives 1 Learning Objective Describe the basic elements of a financia