Business Skills All-in-One For Dummies

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• Publisher: For Dummies
• Year: 2018
• ISBN:
  9781119473985
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Find workplace success

There are some things that will never go out of style, and good business skills are one of them. With the help of this informative book, you'll learn how to wear multiple hats in the workplace no matter what comes your way—without ever breaking a sweat.

Compiled from eight of the best Dummies books on business skills topics, Business Skills All-in-One For Dummies offers everything you need to hone your abilities and translate them into a bigger paycheck. Whether you're tasked with marketing or accounting responsibilities—or anything in between—this all-encompassing reference makes it easier than ever to tackle your job with confidence.

• Manage a successful operation
• Write more effectively
• Work on the go with Microsoft Office 365
• Deal with marketing, accounting, and projects with ease

If you've ever dreamed about being able to juggle all your work responsibilities without ever dropping the ball, the book is for you.

Book 1

Accounting

Contents at a Glance

1. Chapter 1: Introducing Financial Statements
   1. Setting the Stage for Financial Statements
   2. Income Statement
   3. Balance Sheet
   4. Statement of Cash Flows
   5. A Note about the Statement of Changes in Shareowners’ Equity
   6. Gleaning Important Information from Financial Statements
   7. Keeping in Compliance with Accounting and Financial Reporting Standards
2. Chapter 2: Reporting Profit or Loss in the Income Statement
   1. Presenting Typical Income Statements
   2. Taking Care of Housekeeping Details
   3. Being an Active Reader
   4. Deconstructing Profit
   5. Pinpointing the Assets and Liabilities Used to Record Revenue and Expenses
   6. Reporting Unusual Gains and Losses
   7. Watching for Misconceptions and Misleading Reports
3. Chapter 3: Reporting Financial Condition in the Balance Sheet
   1. Expanding the Accounting Equation
   2. Presenting a Proper Balance Sheet
   3. Judging Liquidity and Solvency
   4. Understanding That Transactions Drive the Balance Sheet
   5. Sizing Up Assets and Liabilities
   6. Financing a Business: Sources of Cash and Capital
   7. Recognizing the Hodgepodge of Values Reported in a Balance Sheet
4. Chapter 4: Reporting Cash Sources and Uses in the Statement of Cash Flows
   1. Meeting the Statement of Cash Flows
   2. Explaining the Variance between Cash Flow and Net Income
   3. Sailing through the Rest of the Statement of Cash Flows
   4. Pinning Down Free Cash Flow
   5. Limitations of the Statement of Cash Flows
5. Chapter 5: Reading a Financial Report
   1. Knowing the Rules of the Game
   2. Making Investment Choices
   3. Contrasting Reading Financial Reports of Private versus Public Businesses
   4. Using Ratios to Digest Financial Statements
   5. Frolicking through the Footnotes
   6. Checking Out the Auditor’s Report

Chapter 1

Introducing Financial Statements

IN THIS CHAPTER

Identifying the information components in financial statements

Evaluating profit performance and financial condition

Knowing the limits of financial statements

Recognizing the sources of accounting standards

In this chapter, you get interesting tidbits about the three primary business financial statements, or financials, as they’re sometimes called: the income statement, the balance sheet, and the statement of cash flows.

For each financial statement, we introduce its basic information components. The purpose of financial statements is to communicate information that is useful to the readers of the financial statements, to those who are entitled to the information. Financial statement readers include the managers of the business and its lenders and investors. These constitute the primary audience for financial statements. (Beyond this primary audience, others are also interested in a business’s financial statements, such as its labor union or someone considering buying the business.) Think of yourself as a shareholder in a business. What sort of information would you want to know about the business? The answer to this question should be the touchstone for the accountant in preparing the financial statements.

The financial statements explained in this chapter are for businesses. Business financial statements serve as a useful template for not-for-profit (NFP) entities and other organizations (social clubs, homeowners’ associations, retirement communities, and so on). In short, business financial statements are a good reference point for the financial statements of non-business entities. There are differences but not as many as you may think. As you go along in this and the following chapters, we point out the differences between business and non-business financial statements.

Toward the end of this chapter, we briefly discuss accounting standards and financial reporting standards. Notice here that we distinguish accounting from financial reporting. Accounting standards deal primarily with how to record transactions for measuring profit and for putting values on assets, liabilities, and owners’ equity. Financial reporting standards focus on additional aspects such as the structure and presentation of financial statements, disclosure in the financial statements and elsewhere in the report, and other matters. We use the term financial accounting to include both types of standards.

The philosophy behind the need for standards is that all businesses should follow uniform methods for measuring and reporting profit performance and reporting financial condition. Consistency in financial accounting across all businesses is the name of the game. We won’t bore you with a lengthy historical discourse on the development of accounting and financial reporting standards in the United States. The general consensus (backed by law) is that businesses should use consistent accounting methods and terminology. General Motors and Microsoft should use the same accounting methods; so should Wells Fargo and Apple. Of course, businesses in different industries have different types of transactions, but the same types of transactions should be accounted for in the same way. That is the goal.

Setting the Stage for Financial Statements

This chapter focuses on the basic information components of each financial statement reported by a business.

Offering a few preliminary comments about financial statements

Realistic examples are needed to illustrate and explain financial statements, which presents a slight problem. The information content of a business’s financial statements depends on whether it sells products or services, invests in other businesses, and so on. For example, the financial statements of a movie theater chain are different from those of a bank, which are different from those of an airline, which are different from an automobile manufacturer’s, which are different from — well, you name it.

The classic example used to illustrate financial statements involves a business that sells products and sells on credit to its customers. Therefore, the assets in the example include receivables from the business’s sales on credit and inventory of products it has purchased or manufactured that are awaiting future sale. Keep in mind, however, that many businesses that sell products do not sell on credit to their customers. Many retail businesses sell only for cash (or accept credit or debit cards that are near cash). Such businesses do not have a receivables asset.

The financial statements of a business do not present a history of the business. Financial statements are, to a large extent, limited to the recent profit performance and financial condition of the business. A business may add some historical discussion and charts that aren’t strictly required by financial reporting standards. (Public corporations that have their ownership shares and debt traded in open markets are subject to various disclosure requirements under federal law, including certain historical information.)

The illustrative financial statements that follow do not include a historical narrative of the business. Nevertheless, whenever you see financial statements, we encourage you to think about the history of the business. To help you out in this regard, here are some particulars about the business example in this chapter:

• It sells products to other businesses (not on the retail level).
• It sells on credit, and its customers take a month or so before they pay.
• It holds a fairly large stock of products awaiting sale.
• It owns a wide variety of long-term operating assets that have useful lives from 3 to 30 years or longer (building, machines, tools, computers, office furniture, and so on).
• It has been in business for many years and has made a profit most years.
• It borrows money for part of the total assets it needs.
• It’s organized as a corporation and pays federal and state income taxes on its annual taxable income.
• It has never been in bankruptcy and is not facing any immediate financial difficulties.

The following sections present the company’s annual income statement for the year just ended, its balance sheet at the end of the year, and its statement of cash flows for the year.

Looking at other aspects of reporting financial statements

Dollar amounts in financial statements are typically rounded off, either by not presenting the last three digits (when rounded to the nearest thousand) or by not presenting the last six digits (when rounded to the nearest million by large corporations). We strike a compromise on this issue and show the last three digits for each item as 000, which means that we rounded off the amount but still show all digits. Many smaller businesses report their financial statement dollar amounts to the last dollar or even the last penny, for that matter. Keep in mind that having too many digits in a dollar amount makes it hard to comprehend.

Actual financial statements use only one- or two-word account titles on the assumption that you know what all these labels mean. What you see in this chapter, on the other hand, are the basic information components of each financial statement. We provide descriptions for each financial statement element rather than the terse and technical...

Table of contents

• Cover
• Title Page
• Table of Contents
• Introduction
• Book 1: AccountingAccounting
• Book 2: Operations Management
• Book 3: Decision-Making
• Book 4: Project Management
• Book 5: LinkedIn
• Book 6: Business Writing
• Book 7: Digital Marketing
• About the Authors
• Connect with Dummies
• Index
• End User License Agreement