Transaction analysis and financial statements

 Complete three accounting exercises related to transaction analysis and financial statements using a provided worksheet.

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Introduction

Accounting is the language used by a business to communicate how well it is performing to its many stakeholders. Stockholders want to know how their money has been used and what return they will receive on their investment. Creditors want to know the business has the financial resources to continue their business relationship. Potential investors want to know if a business is a good investment. Lastly, employees of a business want to know that their hard work is paying off in continued employment. Each of these stakeholders has a vested interest in the success of the business, and financial reporting will provide them with the data needed to make sound business and investment decisions.

The Accounting Cycle

The accounting cycle begins when business events are translated to transactions, which affect the financial health of a business, and ends with the preparation of financial statements used to communicate financial health to the various stakeholders of the business.

Adjustments and Financial Statements

The annual reporting period is not always a calendar year ending on December 31. An organization can elect to adopt a fiscal year comprising any 12 consecutive months or 52 consecutive weeks. Regardless of which reporting period an organization chooses, the end of a reporting period requires adjustments that are often necessary to properly reflect revenues when earned and expenses when incurred.

Following these adjustments, an adjusted trial balance will be prepared, and it is from this adjusted trial balance that the necessary financial statements will be prepared. Lastly, certain ledger accounts will require their balances to be closed so they can begin the next accounting period with zero balances. These accounts are known as temporary or nominal accounts. When all of this work has been completed, a new accounting period will begin and the cycle will repeat itself.

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Overview

This assessment consists of three accounting exercises. The exercises are provided in the Transaction Analysis and Financial Statements Worksheet. Use this worksheet to record and submit your solutions for Exercises 1-1, 1-2, and 1-3.

Preparation

In addition, practice problems for each exercise are provided in the Assessment 1 Practice Problems Worksheet. The worksheet and answer key can be found in the Capella Resources activity of this assessment and are optional.

The following resource is required to complete the assessment.

Capella Resources

Click the link provided to view the following resource:

Submission Guidelines

Submit your completed Transaction Analysis and Financial Statements Worksheet for faculty evaluation. Please do not submit completed practice problems with your assessment.

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

  • Competency 1: Analyze the relationship between business events and accounting.
    • Comparatively analyze two companies, including asset investments, return on assets, and company expenses.
    • Analyze company equity, including correct net income and debt ratio calculations.
  • Competency 2: Apply accounting principles as the language of business.
    • Prepare T-accounts, adjusting journal entries, and an adjusted trial balance.

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