Prof. William C. Auden
Principles of Accounting
Submitted by: Jason K. Hauck
MODULE 1 CASE
In the following pages I will be discussing several topics to include: the importance of the GAAP (Generally Accepted Accounting Principles), as well as comparing current assets and liabilities to non-current items. I will also review the financial statements for the Sony Corporation and the Google Corporation, locating the balance sheets, income statements, and statement of cash flows for each. I will give my opinion about each of them in reference to the usefulness of their net income vs. cash from operating activities. Finally I intend to make a prediction about each company after reviewing their financial statements and reach one additional conclusion about each company from the additional information provided in their annual reports.
According to the background material provided for module one, financial statements will be prepared under a set of principles or guidelines.
In the United States these are called Generally Accepted Accounting Principles (GAAP). These are a detailed accumulation of specific rules generated by a series of authoritative private sector bodies. The current body is the Financial Accounting Standards Board (FASB). Most other countries generally follow a set of rules called the International Accounting Standards (IAS) as issued by the International Accounting Standards Committee (IASC). Some countries, such as Canada, the United Kingdom, and Australia supplement the IAS with their own additional standards.
Current assets are those assets which are consumed in the normal operating cycle of the organization or are converted to cash within the normal operating cycle of the organization or one year whichever is longer plus prepaid expenses. The operating cycle is the progression (in normal activities) from cash to inventory to receivables and back to cash. Some activities, like the aging of alcohol, take more...