Question

Choose at least two concepts you have learned in Intermediate Accounting, 2nd edition from the list below and explain how you may use them in your present or future accounting position. Make sure you provide details on how each concept will help you support the financial goals of the company you currently work for or will work for in the future.

PS: Please I need a complete answer. Thanks

The concepts are as follow:

retained earnings

Earnings per share

Statement of retained earnings

Stock option

Memo writing

Stockholders' equity

Revenue reognition

Contributed capital

Accounting for income tax

Accounting for postretirement benefits

Accounting for leases

Capital lease

Operating lease

Statement of cash flows

Accounting for changes and errors

Change in an Accounting Principle

Change in an Accounting Estimate

Change in a Reporting Entity.

Errors

retrospective adjustment method

prospective method

direct effect of a change in accounting principle

indirect effect of a change in accounting principle

Answer 1

Statement of Cash Flow:

There are three important Finncial Statement and amongst them is the Statement of Cash Flow. The statement helps in depicting the flow of cash movement from the organisation .

The statement of cash flows acts as a connenction between the balance sheet and the statement of profit and loss , tracing how money flowed in and out of the organisation.

Three Main Acitivities of Cash Flow Statement are:

1. Operating Activities: The main activities of an organisation that generates revenue are termedas operating activities , In simpler terms, cash flow from current liabilities and current asset accounts for change in cash flow from Operating activities.
2. Investing Activities: Cash flow from the purchase and retirement of capital asset forms part of Investing Acitivities
3. Financing Activities: Cash flow that affects the borrowings or the Equity comes under the financing activities .

How to use the concept in Accounting Position:

The Cash flow statement helps in accounting for the flow of cash , that is receipt and utilisation of cash within and outside the organisation.

The cash flow statement also helps in bifurcating and accounting for cash inflow and outflow between the different activities that is Operating , financing or Investing activities . The stetement allows the organisation to point out the areas where problem exist and need to be fixed .

How it will help you to support the financial goals of the company.

• As we have discussed above cash flow from operating activities is from the main revenue generating activities of the organisation ,so if the cash flow from operating activities is high , it depicts ' high Standard ' of earnings .

• This statment helps the user of the financial statement to understand the cash inflow and outflow and in turn helps to understand the whole picture .

Earning Per Share (EPS):

Earning per share, measures the amount of net income earned per share of stock outstanding.

Basically in simple words, this is the amount of money each share of stock would receive if all of the profits were distributed .

How to use the concept in Accounting Position:

Earnings per share (EPS) = Net Income Available to Common Shareholders/Number of Common Shares Outstanding

• It helps the organisation to account for the earning capacity of the organisation in form of earning per share held by the share holder .
• As per the international standards EPS needs to be dislcosed as notes to accounts .

How it will help you to support the financial goals of the company.

• All companies work towards one goal that is Maximization of Shareholder's Wealth, Earnings per share is also a calculation that shows how profitable a company is on a shareholder basis. Investor will be interested to pay more if the EPS is high .
• High EPS also depicts that the company has amble amount of retained earning which can either be invested in organisation furure plans ordistributed as dividend .