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Topic 4--Accounting Mechanics
Lecture Objective:
To tie together the loose ends regarding
financial accounting and financial statements.
 | The Annual Report
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| The Audit Report
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| Notes to the Financial Statements
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| Supplementary Schedules
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4.0 The
Annual Report
An annual report contains not only financial
statements but also other information. In general the annual report contains:
| the financial statements and auditors report
(usually consisting of BS, statement of revenues & expenditures, statement of net
assets, statement of cash, notes to financial statements)
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| supplementary schedules that provide
additional information about the numbers contained in the aforementioned statements
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4.1 Audit Report
etc
| auditors examine the F/S's and provide a
report that states whether the statements have been prepared in accordance with
GAAP....the report also states that the audit has been conducted in accordance with GAAS.
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| auditors can issue either a clean opinion, or a qualified opinion which states that the
auditor has some concerns about specific aspects of the F/S's
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| within the domain of auditing, it is
important to note that the practice of auditing is always one of interpretation--thus a
high degree of professional judgment is involved in deciding whether GAAP has been
followed etc.
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4.2 Notes to
F/S's
The notes to the financial statements provide
supplementary financial information that is necessary to interpret the financial
statements. Since the notes are an integral part of the financial statements, they
are audited by the auditor.
Normally required info:
| significant accounting policies
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| back-up details on significant F/S figures
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| significant info not contained in the F/S
figures
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| analysis of revenues by segment (geographic
or otherwise)
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4.3
Supplementary Schedules
| governments usually require standardized statements for reporting
entities to ensure that the statements are comparable across school districts, hospitals
etc
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| to assist in the evaluation of these entities, the government may
request certain supplementary schedules
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| the information contained in these schedules is NOT new
information--it simply represents the re-arrangement of the information entered into
accounting system and already reported in the three primary financial statements
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| this information is quite useful in that it provides breakdowns by
different revenue and expense categories
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4.4 Terminology
Recap
| assets and liabilities
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| "net assets"
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| accrual basis of accounting
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| amortization/depreciation
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| adjusting entries
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| revenues and expenses
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| deferred revenues
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| unamortized capital contribution
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| surplus/deficit/income/loss
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4.5 The Parkland
Board--One Last Time!
Pat Pringle (a figment of my imagination of course!) expected a
raucous meeting when the most recent financial statements were to be presented to the
general public. If past meetings were any indication, there would be people asking:
(1) what was the average salary of Parkland teachers? (2) was the Board short-changing its
special needs students? (3) was the Board investing enough in technology? and (4) was the
Board spending too much on administration?
In preparation for this meeting, Pat decided to review the supporting
schedules to see if she could cobble together an answer to the aforementioned questions.
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