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Date Submitted: 11/20/2015 04:41 PM
Transactions are summarized in accounts, and accounts are further summarized
in the financial statements. In this sense, transactions can be seen as the bricks that
build the financial statements. By learning about the form, content, and relationships
among financial statements in this chapter, you will better understand the process of
building those results—bookkeeping and transaction analysis—described in Chapter 4
and subsequent chapters.
Current generally accepted accounting principles and auditing standards require
that the financial statements of an entity show the following for the reporting period:
Financial position at the end of the period.
Earnings for the period.
Cash flows during the period.
Investments by and distributions to owners (i.e., stockholders) during the period.
The financial statements that satisfy these requirements are, respectively, the:
Balance sheet (or statement of financial position).
Income statement (or statement of earnings, or profit and loss statement, or
statement of operations).
Statement of cash flows.
Statement of changes in stockholders’ equity (or statement of changes in capital
stock and/or statement of changes in retained earnings).
In addition to the financial statements themselves, the annual report will probably
include several accompanying notes (sometimes called the financial review) that
include explanations of the accounting policies and detailed information about many
of the amounts and captions shown on the financial statements. These notes are designed
to assist the reader of the financial statements by disclosing as much relevant
34 Part 1 Financial Accounting
supplementary information as the company and its auditors deem necessary and appropriate.
For Campbell Soup Company, the notes to the 2011 financial statements are
shown in the “Notes to Consolidated Financial Statements” section on pages 715–750
of the annual report in the appendix. One of this text’s objectives is to enable...