【正文】 n s u l t i n g R e v e n u e 8 4 , 0 0 0$ 9 6 , 0 0 0$ I n t e r s t R e v e n u e 3 , 0 0 0 S a l a r y E x p e n s e ( 1 6 , 0 0 0 ) ( 2 2 , 0 0 0 ) A d v e r t i s i n g E x p e n s e ( 2 , 0 0 0 ) N e t I n c o m e 6 6 , 0 0 0$ 7 7 , 0 0 0$ B e g i n n i n g C o m m o n S t o c k $ 5 , 0 0 0$ P l u s : C o m m o n S t o c k I s s u e d 5 , 0 0 0 2 5 , 0 0 0 E n d i n g C o m m o n S t o c k 5 , 0 0 0 3 0 , 0 0 0 B e g i n n i n g R e t a i n e d E a r n i n g s 6 6 , 0 0 0 P l u s : N e t I n c o m e 6 6 , 0 0 0 7 7 , 0 0 0 L e s s : D i v i d e n d s ( 1 0 , 0 0 0 ) E n d i n g R e t a i n e d E a r n i n g s 6 6 , 0 0 0 1 3 3 , 0 0 0 T o t a l S t o c k h o l d e r s 39。 E q u i t y 7 1 , 0 0 0$ 1 6 3 , 0 0 0$ C O N N E R C O N S U L T A N T SI n c o m e S t a t e m e n t sF o r t h e Y e a r s E n d e d D e c e m b e r 3 1238 Vertical Financial Statements 2022 2022A s s e t sC a s h 5 3 , 0 0 0$ 9 0 , 0 0 0$ A c c o u n t s R e c e i v a b l e 2 4 , 0 0 0 1 8 , 0 0 0 I n t e r e s t R e c e i v a b l e 3 , 0 0 0 C e r t i f i c a t e o f D e p o s i t 6 0 , 0 0 0 T o t a l A s s e t s 7 7 , 0 0 0$ 1 7 1 , 0 0 0$ L i a b i l i t i e sS a l a r i e s P a y a b l e 6 , 0 0 0$ 8 , 0 0 0$ S t o c k h o l d e r s 39。 E q u i t yC o m m n S t o c k 5 , 0 0 0$ 3 0 , 0 0 0 R e t a i n e d E a r n i n g s 6 6 , 0 0 0 1 3 3 , 0 0 0 T o t a l S t o c k h o l d e r s 39。 E q u i t y 7 1 , 0 0 0 1 6 3 , 0 0 0 T o t a l L i a b i l i t i e s a n d S t o c k h o l d e r s 39。 E q u i t y 7 7 , 0 0 0$ 1 7 1 , 0 0 0$ B a l a n c e S h e e t sA s o f D e c e m b e r 3 1C O N N E R C O N S U L T A N T S239 Vertical Financial Statements 2022 2022C a s h Fl ow s f r om O pe r a t i ng A c t i v i t i e sC a s h R e c e i pt s f r om C us t om e r s 6 0 , 0 0 0$ 1 0 2 , 0 0 0 C a s h P a y m e nt s f or S a l a r y E x pe ns e ( 1 0 , 0 0 0 ) ( 2 0 , 0 0 0 ) C a s h P a y m e nt s f or A dv e r t i s i ng E x pe ns e s ( 2 , 0 0 0 ) N e t C a s h Fl ow f r om O pe r a t i ng A c t i v i t i e s 4 8 , 0 0 0 8 2 , 0 0 0$ C a s h Fl ow s f or I nv e s t i ng A c t i v i t i e s C a s h P a y m e nt t o P urc ha s e C D ( 6 0 , 0 0 0 ) C a s h Fl ow s f r om Fi na nc i ng A c t i v i t i e sC a s h R e c e i pt s f r om I s s ui ng C om m on S t oc k 5 , 0 0 0 2 5 , 0 0 0 C a s h P a y m e nt s f or D i v i de nd s ( 1 0 , 0 0 0 ) N e t C a s h Fl ow f r om Fi na nc i ng A c t i v i t i e s 5 , 0 0 0 1 5 , 0 0 0 N e t I nc r e a s e i n C a s h 5 3 , 0 0 0 3 7 , 0 0 0 P l us B e gi nn i ng C a s h B a l a nc e 5 3 , 0 0 0 E nd i ng C a s h B a l a nc e 5 3 , 0 0 0$ 9 0 , 0 0 0$ C O N N E R C O N S U LT A N TSS t a t e m e nt of C a s h Fl ow sFo r t he Y e a r s E nd e d D e c e m be r 3 1240 LO 8 Discuss the primary ponents of corporate governance. 241 Corporate Governance Corporate governance is the set of relationships between the board of directors, management, shareholders, auditors, and other stakeholders that determines how a pany is operated. 242 Importance of Ethics ? The accountant’s role requires trust and credibility. ? Accounting information is worthless if the accountant is not trustworthy. ? Therefore, the accounting profession requires high ethical standards. 243 AICPA Code of Professional Ethics Includes articles requiring CPAs to ? Exercise sensitive professional and moral judgments. ? Act in a way to serve the public interest. ? Perform with the highest sense of integrity. ? Be objective and independent, in fact and appearance. ? Exercise due care. SarbanesOxley Act ? Prompted by the audit failures of Enron, WorldCom, and others ? Key provisions: – Created the Public Company Accounting Oversight Board (PCAOB) – Requires management to certify financial statements – Imposes harsh penalties on management for violations 244 245 The Fraud Triangle Rationalization Pressure Opportunity Key to protecting yourself and your pany: personal integrity. 246 LO 9 Classify accounting events into one of four categories. 247 Recap: Types of Transactions The described transactions can be classified into one of four categories: Asset use Increase assets, increase claims on assets Increase one asset, decrease another asset Decrease assets, decrease claims on assets Asset source Asset exchange Claims exchange Increase one claims account, decrease another. 248 LO 10 Appendix: Describe the auditor’s role in financial reporting. 249 The Financial Analyst How can a financial analyst know that a pany really did follow GAAP? Certified Public Accountants 250 Materiality and Financial Audits Auditors do not guarantee that financial statements are absolutely correct—only that they are materially correct. Material Item An error, or other reporting problem, that would influence the decision of an average prudent investor. 251 Types of Audit Opinions Unqualified Adverse Qualified Disclaimer 252 End of Chapter Two