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اسمحوا لى بان اتقدم بكامل الشكر الى سادة مشرفين المنتدى واداراتهم على ثقتهم فيه ومنحى هذا الشرف لتولى مثل هذا المنصب الذى اطمح من خلاله ان اقدم لكم كل ما يصل الى يدى ومفيد حتى نستطيع جميعا الاستفادة والافادة لنا ولكم واحب ان انوه ان فوق كل ذى علم عليم وقد اخطى وقد اصيب فان اصبت فمن الله وان اخطات فاغفروا لى وصححوا ليه ولكم جزبل الشكر جميعا والان اسمحوا لى ان اقدم لكم باقة من معادلات التحليل المالى والنسب وسوف ااقوم بوضعها بتسلسل فى نفس الموضوع حتى تكون مرجع لنا جميعا [align=left:e16cc9c06c] Formula to calculate acid test ratio: Acid Test Ratio = (cash + marketable securities + accounts receivable) / current liabilities Acid test ratio definition and explanation: The acid test ratio is also known as the quick ratio. The acid test ratio measures the immediate amount of cash available to satisfy short term debt. Formula to calculate asset turnover ratio: Asset Turnover Ratio = sales / fixed assets. Asset turnover ratio definition and explanation: A low asset turnover ratio means inefficient utilization or obsolescence of fixed assets, which may be caused by excess capacity or interruptions in the supply of raw materials. Formula to calculate cash turnover ratio: Cash Turnover = (cost of sales {excluding depreciation}) / cash. Cash Turnover Ratio = (365 days)/ cash balance ratio. Cash turnover ratio definition and explanation: The cash turnover ratio indicates the number of times that cash turns over in a year. The cash turnover ratio and cash balance ratio are included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio. Formula to calculate inventory conversion ratio: Inventory Conversion Ratio = (sales x 0.5) / cost of sales. Inventory conversion ratio definition and explanation: The inventory conversion ratio indicates the extra amount of borrowing that is usually available upon the inventory being converted into receivables. The inventory conversion ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio. Formula to calculate inventory turnover ratio: Inventory Turnover Ratio = cost of goods sold / average inventory. Inventory turnover ratio definition and explanation: The inventory turnover ratio measures the number of times a company sells its inventory during the year. A high inventory turnover ratio indicated that the product is selling well. Formula to calculate Accounts receivable turnover ratio: Accounts Receivable Turnover Ratio = annual credit sales / average accounts receivable Accounts Receivable turnover ratio definition and explanation: This is the ratio of the number of times that accounts receivable amount is collected throughout the year. A high accounts receivable turnover ratio indicates a tight credit policy. Formula to calculate age of inventory ratio: Age of Inventory = 365 days / inventory turnover ratio Age of inventory ratio definition and explanation: The Age of Inventory shows the number of days that inventory is held prior to being sold. An increasing age of inventory ratio indicates a risk in the company's inability to sell its products. Individual inventory items should be examined for obsolete or overstocked items. A decreasing age of inventory may represent under-investment in inventory. Formula to calculate (average) collection period: Collection Period = Accounts Receivable X 365 days Credit Sales Collection Period = 365 days Accounts Receivable Turnover Ratio The average collection period calculation uses the average accounts receivable over the sales period. (Average) Collection Period definition and explanation: The collection period or average collection period must be compared to competitors to see whether the credit given, and customer risk, is in line with the industry. A high collection period shows a high cost in extending credit to customers. Formula to calculate average inventory period: Average Inventory Period = (inventory x 365 days) / cost of sales. Average inventory period definition and explanation: The average inventory period is also referred to as Days Inventory and Inventory Holding Period. This ratio calculates the average time that inventory is held. Individual inventories should be looked at to find areas where the inventory, and inventory holding period, can be reduced. The average inventory period should be compared to competitors. The average inventory period is included in the the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio. Formula to calculate average obligation period: Average Obligation Period = accounts payable / average daily purchases. Average obligation period definition and explantion: The average obligation period ratio measures the extent to which accounts payable represents current obligations (rather than overdue ones). The average obligation period ratio is included in the the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio. Formula to calculate bad debts ratio: Bad Debts Ratio = bad debts / accounts receivable. Bad debts ratio definition and explanation: The bad debts ratio is an overall measure of the possibility of the business incurring bad debts. The higher the bad debts ratio, the greater the cost of extending credit. The bad debts ratio is included in the the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio. Formula to calculate breakeven point: Breakeven Point = fixed costs / contribution margin. Breakeven point definition and explanation: The breakeven point is the point at which a business breaks even (incurs neither a profit nor a loss) The breakeven point is the minimum amount of sales required to make a profit. Increasing breakeven points (period to period) indicates an increase in the risk of losses. The breakeven point is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio. Formula to calculate cash break even point: Cash Breakeven Point = (fixed costs - depreciation) / contribution margin per unit. Cash break even point definition and explanation: The cash break even point indicates the minimum amount of sales required to contribute to a positive cash flow. Formula to calculate cash dividend coverage ratio: Cash Dividend Coverage = (cash flow from operations) / dividends. Cash dividend coverage ratio definition and explanation: The cash dividend coverage ratio reflects the company's ability to meet dividends from operating cash flow. A cash dividend coverage ratio of less than 1:1 (100 %) indicates that dividends are draining more cash from the business than it is generating. Formula to calculate cash maturity coverage ratio: Cash Maturity Coverage = (cash flow from operations - dividends) / current portion of long term maturities. Cash maturity coverage ratio definition and explanation: The cash maturity coverage ratio indicates the ability to repay long term maturities as they mature. The cash maturity coverage ratio indicates whether long term debt maturities are in time with operating cash flow Formula to calculate cash reinvestment ratio: Cash Reinvestment Ratio = increases in fixed assets and working capital / (net income + depreciation). Cash reinvestment ratio definition and explanation: This ratio indicates the degree to which net income is absorbed (reinvested) in the business. A cash reinvestment ratio of greater than 1:1 (100%) indicates that more cash is being use4d in the business than being obtained Formula to calculate cash turnover ratio: Cash Turnover = (cost of sales {excluding depreciation}) / cash. Cash Turnover Ratio = (365 days)/ cash balance ratio. Cash turnover ratio definition and explanation: The cash turnover ratio indicates the number of times that cash turns over in a year. Formula to calculate collection period to payment period ratio: Collection Period to Payment Period = collection period / payment period. Collection period to payment period ratio explanation and definition: The collection period to payment period above 1:1 (100%) indicates that suppliers are being paid more rapidly than the company is collecting from their customers Formula to calculate days of liquidity: Days of Liquidity = (quick assets x 365 days) / years cash expenses. Days of liquidity definition and explanation: The days of liquidity ratio indicates the number of days that highly liquid assets can support without further cash coming from cash sales or collection of receivables Formula to calculate (average) collection period: Collection Period = Accounts Receivable X 365 days Credit Sales Collection Period = 365 days Accounts Receivable Turnover Ratio The average collection period calculation uses the average accounts receivable over the sales period Average) Collection Period definition and explanation: The collection period or average collection period must be compared to competitors to see whether the credit given, and customer risk, is in line with the industry. A high collection period shows a high cost in extending credit to customers Formula to calculate (average) collection period: Collection Period = Accounts Receivable X 365 days Credit Sales Collection Period = 365 days Accounts Receivable Turnover Ratio The average collection period calculation uses the average accounts receivable over the sales period. (Average) Collection Period definition and explanation: The collection period or average collection period must be compared to competitors to see whether the credit given, and customer risk, is in line with the industry. Formula to calculate fixed charge coverage ratio: Fixed Charge Coverage Ratio = (Net Income Before Interest and Taxes + interest + fixed costs) / fixed costs. Fixed charge coverage ratio definition and explanation: The fixed charge coverage ratio indicates the risk involved in ability to pay fixed costs when business activity Formula to calculate margin of safety ratio: Margin of Safety Ratio = (expected sales - break even sales) / break even تابع Margin of safety ratio definition and explanation: The margin of safety ratio shows the percent by which sales exceed the breakeven point Revenue per employee (net sales per employee) = net sales / number of employees This ratio indicate the average revenue generated per person employed. The revenue per employee (or net sales per employee) ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio. Formula to calculate number of days inventory: Number of Days Inventory = 365 days / inventory turnover ratio. Number of days inventory ratio definition and explanation: The number of days inventory is also known as average inventory period and inventory holding period. A high number of days inventory indicates that their is a lack of demand for the product being sold. A low days inventory ratio (inventory holding period) may indicate that the company is not keeping enough stock on hand to meet demands. Formula to calculate operating cycle: Operating Cycle = age of inventory + collection period. Operating cycle definition and explanation: The operating cycle is the number of days from cash to inventory to accounts receivable to cash. The operating cycle reveals how long cash is tied up in receivables and inventory. A long operating cycle means that less cash is available to meet short term obligations. Formula to calculate payment period: Payment Period = (365 days x supplies payable) / inventory. Payment period definition and explanation: The payment period indicates the average period for paying debts related to inventory purchases. Payment Period to Average Inventory Period = payment period / average inventory period A payment period to average inventory period above 1:1 (100%) indicates that the inventory is sold before it is paid for (inventory does not need to be financed). (the average inventory period is also known as the inventory holding period) Formula to calculate payment period to operating cycle: Payment Period to Operating Cycle = payment period / (average inventory period + collection period). Payment period to operating cycle ratio definition and explanation: A payment period to operating cycle ratio above 1:1 (100%) indicates that the inventory is sold and collected before it is paid for (inventory does not need to be financed). Formula to calculate capital acquisition ratio: Capital Acquisition Ratio = (cash flow from operations - dividends) / cash paid for acquisitions. Capital acquisition ratio definition and explanation: The capital acquisition ratio reflects the company's ability finance capital expenditures from internal sources. A ratio of less than 1:1 (100 %) indicates that capital acquisitions are draining more cash from the business than it is generating. Formula to calculate capital employment ratio: Capital Employment Ratio = sales / (owners equity - non-operating assets). Capital employment ratio definition and explanation: The capital employment ratio shows the amount of sales which owner's investment in operations generates Formula to calculate capital structure ratio: Capital Structure Ratio = long term debt / (shareholders equity + long term debt). Capital structure ratio definition and explanation: The capital structure ratio shows the percent of long term financing represented by long term debt. A capital structure ratio over 50% indicates that a company may be near their borrowing limit (often 65%). Formula to calculate capital to non-current assets ratio: Capital to Non-Current Assets Ratio = owners equity / non-current assets Capital to non-current assets ratio definition and explanation: A higher capital to non-current assets ratio indicates that it is easier to meet the business' debt and creditor commitments. Formula to calculate debt to equity ratio (financial leverage ratio): Debt to Equity Ratio = Short Term Debt + Long Term Debt Total Shareholders Equity Debt to equity ratio definition and explanation: Debt to Equity Ratio is also referred to as Debt Ratio, Financial Leverage Ratio or Leverage Ratio. The debt to equity (debt or financial leverage) ratio indicates the extent to which the business relies on debt financing. Upper acceptable limit of the debt to equity (debt or financial leverage) ratio is usually 2:1, with no more than one-third of debt in long term. A high financial leverage or debt to equity ratio indicates possible difficulty in paying interest and principal while obtaining more funding. Formula to calculate defensive interval period: Defensive Interval Period = (cash + marketable securities + accounts receivable) / average daily purchases. Defensive interval period definition and explanation: This ratio indicates how long a business can operate on its liquid assets without needing further revenues. The defensive interval period reveals near-term liquidity as a basis to meet expenses Formula to calculate equity multiplier ratio: Equity Multiplier = total assets / shareholders equity. Equity multiplier ratio definition and explanation: The equity multiplier ratio discloses the amount of investment leverage. Formula to calculate financial leverage ratio: Financial Leverage Ratio = total debt / shareholders equity. Financial leverage ratio definition and explanation: The financial leverage ratio is also referred to as the debt to equity ratio. The financial leverage ratio indicates the extent to which the business relies on debt financing. Upper acceptable limit of the financial leverage ratio is usually 2:1, with no more than one-third of debt in long term. A high financial leverage ratio indicates possible difficulty in paying interest and principal while obtaining more funding. Formula to calculate fixed assets to short term debt ratio: Fixed Assets to Short Term Debt = fixed assets / (accounts payable + current portion of long term debt). Fixed assets to short term debt ratio definition and explanation: The fixed assets to short term debt ratio can indicate dangerous financial policies due to business vulnerability in a tight money market. A low fixed assets to short term debt ratio indicates the return on fixed assets may not be realized before long term liabilities mature. Fixed costs to total assets = fixed costs / total assets An increase in the fixed costs to total assets ratio may indicate higher fixed charges, possibly resulting in greater instability in operations and earnings. The fixed costs to total assets ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio Formula to calculate fixed coverage ratio: Fixed coverage = earnings before interest and taxes / fixed charges before taxes. Fixed coverage ratio definition and explanation: The fixed coverage ratio indicates the ability of a business to pay fixed charges (fixed costs) when business activity falls. Formula to calculate debt to equity ratio (financial leverage ratio): Debt to Equity Ratio = Short Term Debt + Long Term Debt Total Shareholders Equity Debt to equity ratio definition and explanation: Debt to Equity Ratio is also referred to as Debt Ratio, Financial Leverage Ratio or Leverage Ratio. The debt to equity (debt or financial leverage) ratio indicates the extent to which the business relies on debt financing. Upper acceptable limit of the debt to equity (debt or financial leverage) ratio is usually 2:1, with no more than one-third of debt in long term. A high financial leverage or debt to equity ratio indicates possible difficulty in paying interest and principal while obtaining more funding. Formula to calculate interest coverage ratio: Interest Coverage Ratio = (net income + interest) / interest. Interest coverage ratio definition and explanation: The interest coverage ratio is also referred to as the times interest earned ratio. The interest coverage ratio indicates the extent of which earnings are available to meet interest payments. A lower interest coverage ratio means less earnings are available to meet interest payments and that the business is more vulnerable to increases in interest rates. Formula to calculate gearing ratio: Gearing Ratio = long term debt / shareholders equity. Gearing ratio (long term debt to shareholders equity) definition and explanation: The long term debt to shareholders equity ratio is also referred to as the gearing ratio. A high gearing ratio is unfavourable because it indicates possible difficulty in meeting long term debt obligations Non-Current Assets to Non-Current Liabilities = non-current assets / non-current liabilities [/align:e16cc9c06c].

Teem company purchased equipment costing 214 000 $ on march,3,,2011 ,under the assumption it would have a five-year life and a 34000 trade-in value on Feb 20,2015 a major overhaul on the equipment required the insallation of a new motor .the total cost of the insallation was 56000 and the useful life was adjusted to a total of seven years and a 30000$ trade-in value.teem uses the straight line methode to the nearest month for calculating amortization . Required : 1- record the insallation of the new motor on FEB 20,2015 ((PAID CASH )) B- record amortization at Dec 31,2015 Teems year-end . ************************************ Q2. ON october 6,2011 greenbelt construction traded in an old tractor for a new truck ,receiving 56000 trade-in allowance and paying the remaining 164000$ in cash the old tractor cost 190000 and straight line amortization of 105000 had ,been recorded as of october 6,2011 Assume the fair value of the old tractor was equal to the trade-in allowance a- what was the book value of the old tractor b- what was the gain or loss on the exchange? c- what amount should be debited to the new truck account d- record the exchange وجزاكم الله خيرا اخواني الاعزاء وساظل ادعو لكم ما دمت على قيد الحياة

hi our friend. Please i want one assignment about finanacial statment analysis and also how to analysis balance sheet and income statment by ratio analysis ;):dthanks you

الَسَسَسَسَلاآ‘إم علَيكم وِ رحَمـ~ـه الله وبرِكآ‘إتـ~ـه . . أخَتكم طآ‘إلبه المسآعدهـ في بعَض الاسئله وَللي يعرف الاجوبه أوِ طريقـ~ـه الح‘ـل على الأقـ~ـل لاآ‘إ يبخل علي بليزِزِ .. ورِبي يوفقه دنيآ‘إ وآخـ~ـرهـ اللي يسآ‘إعدنـ~ـي . . وهـّ~ـذي الأسـئلـ~ـه The TMA Questions: Q.1: Role of accounting records in an organization: Many small businesses have no obligation to issue financial statements to outsiders, that is, to investors and creditors. Give at least three reasons why such businesses would maintain accounting records if financial statements are not required by outsiders. (15 Marks) Q.2: The internet is a good place to get information that is useful to you in your study of accounting. For example, you can find information about current events, professional accounting organizations, and specific companies that may support your study. Instructions: a- Access the FASB Internet site (www.fasb.org). Look under the category ‘About FASB’. Identify five key points about the role of FASB for developing the accounting profession. (10 Marks) b- Visit the home page of the NEXT Company at: www.next.co.uk. From Next’s home page and then ‘The Company’, access the company’s most recent annual report. Calculate the ratios of: current ratio and debt ratio from ‘The Consolidated Statements’ for the annual years to January 2009 and 2008. Show your work in calculating these ratios. Write a brief statement describing what you have learned about the company’s liquidity. Internet sites are time and date sensitive. It is the purpose of this exercise to have you explore the internet. You may need to use the Google! ****** engine http://www.google.com (or another favorite ****** engine) to find a company’s current web address. (20 Marks) Q.3: “A debate between you ‘as an Accountant’ and one of your friends” (55 Marks) 1- One of your friends told you that as he was reading the news papers, he saw which is called ‘The Financial Statements’ of one of the public sector corporations, and he said: ‘as you are an accountant I want you to give me explanations to some of questions about these statements please’: a- The value of the buildings and lands is very low, and that is not considered as the current market value as it is today. Do you think that? And is there a reason for that? (10 Marks) b- These statements were prepared for an accounting period ended June 30, 2009, so what does it mean? And are these statements prepared every year? And for why all these efforts and costs for preparing these statements? And why at the end of June? And when did this accounting period start? (5 Marks) 2- I noticed my friend added the following, while I was reading the financial statements: a- The assets and liabilities are arranged in groups, think they are similar, and is it right? And why? (10 Marks) b- With these statements there is ‘The Auditor Report’, and it includes this paragraph: ‘In our opinion, the financial statements give a true and fair view in accordance with Generally Accepted Accounting Principles (GAAP)’. What does he mean? And what is meant by GAAP? And what is the importance of this report? (5 Marks) 3- Sorry my dear friend, I noticed also the following: a- There is a difference between the income statement and the balance sheet; the income statement hasn’t two sides, but the balance sheet has a left and right sides, is it true? And why? (10 Marks) b- The balance sheet’s sides have been equaled, but the income statement ended by which is called ‘net income’. Why weren’t the elements of the income statement balanced? Does it signal to some things wrong? And if the income statement is true, why is the balance sheet different in this thing? (10 Marks) c- I know my friend that I fatigue you, so this is the last inquire. I have found which is called ‘The Statement of Cash Flows’. Why do we need a statement of cash flow when we have balance sheet and income statements? (5 Marks .. بليزِ محتآجه الحل أو طريقه الحل بسرعـ~ـه موِفقين جميعاً . .

1- (i) Production Budget:- Closing Stock Products 20% Month Sales Forecast Closing Stock December -- 6,400 January 32,000 6,000 February 30,000 6,200 March 31,000 5,600 April 28,000 5,200 May 26,000 5,400 June 27,000 5,800 July 29,000 4,800 August 24,000 -- Jan. Feb. March April May June Total July Closing Stock Required 6,000 6,200 5,600 5,200 5,400 5,800 5,800 4,800 (+)Sales Forecast 32,000 30,000 31,000 28,000 26,000 27,000 174,000 29,000 Total Required 38,000 36,200 36,600 33,200 31,400 32,800 179,800 33,800 (-) Opening Stock (6,400) (6,000) (6,200) (5,600) (5,200) (5,400) (6,400) (5,800) Produce 31,600 30,200 30,400 27,600 26,200 27,400 173,400 28,000 (ii) Material Usage Budget:- Jan. Feb. March April May June Total July Budgeted Production 31,600 30,200 30,400 27,600 26,200 27,400 173,400 28,000 Unit Content 8 8 8 8 8 8 8 8 Material Required 252,800 241,600 243,200 220,800 209,600 219,200 1,387,200 224,000 (iii) Material Purchase Budget: Closing Stock Material 25% Month Sales Forecast Closing Stock December -- 63,200 January 252,800 60,400 February 241,600 60,800 March 243,200 55,200 April 220,800 52,400 May 209,600 54,800 June 219,200 56,000 July 224,000 -- Jan. Feb. March April May June Total Closing Stock Required 60,400 60,800 55,200 52,400 54,800 56,000 56,000 (+) Production Required 252,800 241,600 243,200 220,800 209,600 219,200 1,387,200 Total Required 313,200 302,400 298,400 273,200 264,400 275,200 1,443,200 (-) Opening Stock (63,200) (60,400) (60,800) (55,200) (52,400) (54,800) (63,200) Purchases 250,000 242,000 237,600 218,000 212,000 220,400 1,380,000 Purchase Price/kg 6 6 6 6 6 6 6 Purchases Cost 1,500,000 1,452,000 1,425,600 1,308,000 1,272,000 1,322,400 8,280,000 (iv) Direct Labor Budget: Jan. Feb. March April May June Total Budgeted Production 31,600 30,200 30,400 27,600 26,200 27,400 173,400 Labor Content/unit 4 4 4 4 4 4 4 Budgeted DLHs 126,400 120,800 121,600 110,400 104,800 109,600 693,600 Rate per Hour 6 6 6 6 6 6 6 Direct Labor Cost 758,400 724,800 729,600 662,400 628,800 657,600 4,161,600 (v) Variable Production Overhead Budget According to Direct Labor Hours: Jan. Feb. March April May June Total Budgeted DLHs 126,400 120,800 121,600 110,400 104,800 109,600 693,600 V. Prod. Rate/Hour 4 4 4 4 4 4 4 V. Prod. OH Cost 505,600 483,200 486,400 441,600 419,200 438,400 2,774,400 2- Budgeted Fixed Production Overheads Absorption Rate: Budgeted Fixed Production OH = 3,468,000 = 5 Budgeted DLHs 693,600 BAR = Thus, Budgeted Absorption Rate (BAR) = 5 ₤/DLH. 3- Calculation of Budgeted Production Cost, Total Cost & Selling Price/unit: Direct Material 8 Kg * ₤ 6 = 48 Direct Labor 4 hr * ₤ 6 = 24 Variable Production OH 4 hr * ₤ 4 = 16 Fixed Production OH 4 hr * ₤ 5 = 20 Budgeted Production Cost 108 Sales OH 9 Admin. OH 5 Budgeted Total Cost 122 Profit Margin (25%) 30.5 Budgeted Selling Price 152.5 Budgeted Profit & Loss a/c Sales Revenue 174,000 * ₤ 152.5 = 26,535,000 Cost of Production of Sales: Opening Stock of Material 63,200 * ₤ 6 = 379,200 Purchase (Material Purchase Budget) 8,280,000 Total Available 8,659,200 Closing Stock of Material 56,000 * ₤ 6 = (336,000) Cost of Material Used 8,323,200 Direct Labor 4,161,600 Variable Production OH 2,774,400 Fixed Production OH 3,468,000 Total Cost of Production 18,727,200 Opening Stock 6,400 * ₤ 108 = 691,200 Total Available 19,418,400 Closing Stock 5,800 * ₤ 108 = (626,400) Cost of Production of Sales 132,000 * 63 = (18,792,000) Operating Profit 7,743,000 Sales OH 174,000 * ₤ 9 = 1,566,000 Admin. OH 174,000 * ₤ 5 = 870,000 Total Sales & Admin. OH (2,436,000) Profit before Tax & Zakat 5,307,000

Budget Preparation The following information is availed to you by Gumana Ltd, a manufacturing company which is producing and selling a single product, during the month of December, 2006 a time at which the company is in the process of preparing its budget for the 1st half of the year ending 31st December 2007. (1) Sales Forecast Month sales Forecast (unit) January 28000 February 27000 May 29000 April 31000 May 26000 June 25000 July 23000 August 27000 (2) The unit content The production of one unit of the product requires the usage of 6 kilograms of direct material at an estimated purchase price of LS 8 per kilogram and 5 direct labour working hours at an estimated wage rate of LS 6 per direct labour hour. Variable production overheads are charged into the cost of production of the unit produced at the rate of LS 4 per direct labour hour. Fixed production overheads are estimated for the 1st half of the year 2007 at LS 4118750 and are absorbed into the cost of production of the unit produced by an absorption rate calculated on the basis of the budgeted direct labour hours for the period. (3) The company’s polices In respect of the closing stock of finished goods, the company’s policy is to keep on hand at the end of each month a closing stock equivalent to 25% of the sales forecast quantity in the month that follows the month at the end of which the stock is held. As for the direct material closing stock the company’s policy is to keep on hand at the end of each month an equivalent of 20% of the productions’ requirements of the material in the month that follows the month at the end of which the stock in held. These policy requirements will be adhered to by the end of December, 2006. Sales overheads and administration overheads are estimated and charged into the cost of sales at LS 8and LS 5 per unit respectively. The selling price per unit is determined by adding a profit margin of 20 % of the total budgeted cost of the unit to that cost. Required 1- Prepare monthly by month and in total for the 1st half of the year2007 the following. (i) Production budget. (ii) Material usage budget. (iii) Material purchase budget. (iv) Direct labour budget. (v) Variable production overheads budget. 2- Calculate the budgeted fixed production overheads absorption rate. 3- Calculate the production cost, the total cast and the budgeted selling price per unit. 4- Prepare in full details the budgeted profit and loss account as it would appear on 30th June 2007.

السلام عليكم و رحمة الله وبركاته أرجو منكم حل هذه المسألة ... و لكم جزيل الشكر The Key West Kennel Club is a dog-racing track. Its revenue is derived mainly from attendance and a fixed percentage of the pari mutuel betting. Its expenses for a 90-day season are as follows: Wages of cashiers and ticket takers $150,000 Commissioner's salary 20,000 Maintenance (repairs, etc.) 20,000 Utilities 40,000 Other expenses (depreciation, insurance, advertising, etc.) 100,000 Purses: total prizes paid to winning racers 810,000 The track made a contract with PK, Inc., to park the cars. PK charged the track $4.80 per car. A survey revealed that, on the average, three persons arrived in each car and that half the attendees arrived by private automobiles. The others arrived by taxi and public buses. The track's sources of revenue are: Rights for concession and vending $60,000 Admission charge (deliberately low) $1 per person Percentage of bets placed 10% Required: 1. Assume that each person bets $25 a night. a. How many persons have to be admitted for the track to break even for the season? b. If the desired operating profit for the year is $270,000, how many people would have to attend? 2. If a policy of free admission brought a 20% increase in attendance, what would be the new level of operating profit? Assume that the previous level of attendance was 600,000 people. 3. If the purses were doubled in an attempt to attract better dogs and thus increase attendance, what would be the new break-even point? Refer to the original data and assume that each person bets $25 a night.

Dear Budies Here we are again in CMA Part One , but this time starting the discussions following a new strategy our new strategy is to don't add a complete material in Arabic language as we used to do , but we have to practice CMA contents by discuss it in English Language , and this is because of strengthen the language and to keep the student in a good status First of all i will encourage everybody to get the Hock study Materials because really this material is professional material and More over this it facilitates the non English spoken students to understand the material in a good and deep way as well And also i encourage everybody to get the Gleim Test Prep. the newest one because it is the most powerful test tool in the market and its Questions Libraries will be updated if there is any new questions obtained , Of cours this will be for the genuine copies only Anyway at the end , what i have to say to those who is searching about the best way to be CMA , don't worry just get the proper studying material and concentrate and what every you want to discuss here in the forum you can discuss freely , and if you will navigate through the CMA Part One forum you will find out all the topics required which it mentioned in the Learning Outcome Statements from IMA themselves and this will guide you through any study related to CMA In the CMA Part One forum we will discuss the uncleared Points and topics and questions as well , so if there is any question please please please search about the appropriate topic and insert your question or explanation or comments or any thing in the right place Here in the forum you will find all the tools required , we can add a math formulas and attach photos and reused in topic body and attach a different files I will be glad if i will receive any remarks related to this Thanks for All

انا اكتب بحث وابغى معايير امريكيه وبريطانيه تخص مسؤليه المراجع بشاء المعلومات الاخرى التي تقع خارج نطاق القوائم المالية الاساسيه لان السعوديه ما اصدرت معايير تخص هالموضوع اللي هو نشر القوائم المالية على الانترنت ومسؤليه المراجع واذا فيه ياليت تبلغوني وابغى معااير تخص مسؤليه المراجع تجاه القوائم الماليه والمعلومات الماليه المنشوره على شبكه الانترنت لان عندي هالثلاث معااير في بحث يتكلم عن موضوعي بص قديم من 2001 وابي اعرف فيه تغيير عليها او صار فيه معايير جديده المعايير مذكوره بالكلام اللي تحت المسؤليه عن المعلومات التي تقع خارج نطاق القوائم المالية تتطلب المعايير المهنية الحالية من المراجع الوفاء بمسؤوليات معينة بشأن المعلومات الأخرى التي تقع خارج نطاق القوائم المالية الأساسية ، وخذخ المسؤوليات تتوقف على طبيعة المعلومات ، فقد تكون معلومات تكميلية ملزمة Supplementary Information Required وقد تكون معلومات اختيارية يتم الإفصاح عنها Voluntary Information . ونظرا لعدم وجود معايير سعودية تتعلق بالمعلومات المنشورة على الإنترنت ، فإننا سوف تقتصر الدراسه على المعايير الأمريكية والبريطانية . وتعتبر المعلومات التكميلية جزءا أساسيا من المالي للمنشآت التي تحددها المنظمات المهنية FASB ، GASB ، وعلى الرغم من أن هذه المعلومات لايجب أن تخضع للمراجعة باعتبارها ليست جزءا من القوائم المالية الأساسية إلا أن نشرة معايير المراجعة SAS 52 “Required Supplementary Information” تتطلب تطبيق إجراءات محدودة معينة Certain Limited Procedures هي : v التأكد من أن المنظمات المهنية GASB , FASB تطلب من المنشأة الإفصاح عن المعلومات التكميلية . v الاستفسار من الإدارة بشأن طرق إعداد هذه المعلومات . تحديد مدى اتساق هذه المعلومات مع المعلومات المالية المراجعة والمعلومات الأخرى التي حصل عليها المراجع أما المعلومات المالية الاختيارية التي تفصح عنها المنشآت ، فإن الأصل أن المراجع ليس مسئولا عن مراجعة هذه المعلومات ، ولكن عليه أن يطبق بشأنها معايير مهنية معينة ، حيث يطبق المراجع إرشادات نشرة معايير المراجعة SAS 8 “Other Information in Documents Containing Audited Financial Statements” عندما تعرض هذه المعلومات مع القوائم المالية في مستند أعده العميل ، بينما يطبق المراجع إرشادات نشرة معايير المراجعة SAS 29 “Reporting on Information Accompanying the Basic Financial Statements in Auditor – Submitted Documents “ عندما تعرض هذه المعلومات مع القوائم المالية في مستند خضع لفحص المراجع Auditor-Submitted Document . وتنص نشرة معاييرالمراجعة SAS 8 على أن المراجع ليس مطالبا بمراجعة المعلومات الأخرى ، إلا أنه يجب أن يقرأها ليحدد ما إذا كانت هناك حالات عدم اتساق جوهري أو أخطاء جوهرية تخالف الواقع بالمقارنة مع المعلومات المالية المراجعة . 8 تذكر أن على المراجع أن يستخدم حكمه الشخصي وتقديره المهني ، وإشعار العميل كتابة عن الأخطاء الجوهرية بالمعلومات الأخرى وطلب المشورة القانونية بشأن الخطوات الأخرى واجبة الإتباع . وتتطلب نشرة معايير المراجعه SAS 29 أن يقرر المراجع عم المعلومات الأخرى التي حوتها المستندات التي خضعت لفحصه ، ويجب أن يحدد التقرير بوضوح هذه المعلومات ويذكر أنها ليست جزءا من القوائم المالية الأساسية وأنها معروضة كبيانات إضافية للمستفيد ، ويجب الإشارة إلي أن هذه المعلومات عادلة في علاقتها بالقوائم المالية الأساسية أو التحفظ في تقريره إذا استنتج أنها مضللة ، أو الامتناع عن إبداء الرأي عنها في حالة عدم القدرة على فحصها . ولا يلزم المعيار UK APBS 160 “ Other Information in Documents Containing Audited Financial Statements” بالمملكة المتحدة المراجع بإبداء الرأي عن المعلومات الأخرى التي يتضمنها التقرير السنوي المتضمن للقوائم المالية المراجعة ، ولكن إذا وجد المراجع أي تضليل أو حالات عدم اتساق مع المعلومات المدققة يجب أن يعمل على إزالتها لأن مصداقية القوائم المالية وتقرير المراجعة ربما تنخفض بوجود مثل هذه الحالات. ولكن التفسير الصادر في مارس 1997 م لنشرة معايير المراجعه SAS 8 يذكر أن الموقع غلى الإنترنت ليس مستندا بالمعنى المذكور في هذه النشرة ، لذلك لايطلب من المراجع قراءة المعلومات الأخرى على الموقع الإلكتروني أو تأمل اتساقها مع المستندات الأصليه . كتبت لكم هالجزء عشان تفهمون وش ابي بالضبط الله يخليكم ساعدوني دخلت موقع http://www.aicpa.org/ ومافهمت شي تكفون ساعدوني ضرووووووري وياليت تترجمونها لي

انا اكتب بحث وابغى معايير امريكيه وبريطانيه تخص مسؤليه المراجع بشاء المعلومات الاخرى التي تقع خارج نطاق القوائم المالية الاساسيه لان السعوديه ما اصدرت معايير تخص هالموضوع اللي هو نشر القوائم المالية على الانترنت ومسؤليه المراجع واذا فيه ياليت تبلغوني وابغى معااير تخص مسؤليه المراجع تجاه القوائم الماليه والمعلومات الماليه المنشوره على شبكه الانترنت لان عندي هالثلاث معااير في بحث يتكلم عن موضوعي بص قديم من 2001 وابي اعرف فيه تغيير عليها او صار فيه معايير جديده المعايير مذكوره بالكلام اللي تحت المسؤليه عن المعلومات التي تقع خارج نطاق القوائم المالية تتطلب المعايير المهنية الحالية من المراجع الوفاء بمسؤوليات معينة بشأن المعلومات الأخرى التي تقع خارج نطاق القوائم المالية الأساسية ، وخذخ المسؤوليات تتوقف على طبيعة المعلومات ، فقد تكون معلومات تكميلية ملزمة Supplementary Information Required وقد تكون معلومات اختيارية يتم الإفصاح عنها Voluntary Information . ونظرا لعدم وجود معايير سعودية تتعلق بالمعلومات المنشورة على الإنترنت ، فإننا سوف تقتصر الدراسه على المعايير الأمريكية والبريطانية . وتعتبر المعلومات التكميلية جزءا أساسيا من المالي للمنشآت التي تحددها المنظمات المهنية FASB ، GASB ، وعلى الرغم من أن هذه المعلومات لايجب أن تخضع للمراجعة باعتبارها ليست جزءا من القوائم المالية الأساسية إلا أن نشرة معايير المراجعة SAS 52 “Required Supplementary Information” تتطلب تطبيق إجراءات محدودة معينة Certain Limited Procedures هي : v التأكد من أن المنظمات المهنية GASB , FASB تطلب من المنشأة الإفصاح عن المعلومات التكميلية . v الاستفسار من الإدارة بشأن طرق إعداد هذه المعلومات . تحديد مدى اتساق هذه المعلومات مع المعلومات المالية المراجعة والمعلومات الأخرى التي حصل عليها المراجع أما المعلومات المالية الاختيارية التي تفصح عنها المنشآت ، فإن الأصل أن المراجع ليس مسئولا عن مراجعة هذه المعلومات ، ولكن عليه أن يطبق بشأنها معايير مهنية معينة ، حيث يطبق المراجع إرشادات نشرة معايير المراجعة SAS 8 “Other Information in Documents Containing Audited Financial Statements” عندما تعرض هذه المعلومات مع القوائم المالية في مستند أعده العميل ، بينما يطبق المراجع إرشادات نشرة معايير المراجعة SAS 29 “Reporting on Information Accompanying the Basic Financial Statements in Auditor – Submitted Documents “ عندما تعرض هذه المعلومات مع القوائم المالية في مستند خضع لفحص المراجع Auditor-Submitted Document . وتنص نشرة معاييرالمراجعة SAS 8 على أن المراجع ليس مطالبا بمراجعة المعلومات الأخرى ، إلا أنه يجب أن يقرأها ليحدد ما إذا كانت هناك حالات عدم اتساق جوهري أو أخطاء جوهرية تخالف الواقع بالمقارنة مع المعلومات المالية المراجعة . 8 تذكر أن على المراجع أن يستخدم حكمه الشخصي وتقديره المهني ، وإشعار العميل كتابة عن الأخطاء الجوهرية بالمعلومات الأخرى وطلب المشورة القانونية بشأن الخطوات الأخرى واجبة الإتباع . وتتطلب نشرة معايير المراجعه SAS 29 أن يقرر المراجع عم المعلومات الأخرى التي حوتها المستندات التي خضعت لفحصه ، ويجب أن يحدد التقرير بوضوح هذه المعلومات ويذكر أنها ليست جزءا من القوائم المالية الأساسية وأنها معروضة كبيانات إضافية للمستفيد ، ويجب الإشارة إلي أن هذه المعلومات عادلة في علاقتها بالقوائم المالية الأساسية أو التحفظ في تقريره إذا استنتج أنها مضللة ، أو الامتناع عن إبداء الرأي عنها في حالة عدم القدرة على فحصها . ولا يلزم المعيار UK APBS 160 “ Other Information in Documents Containing Audited Financial Statements” بالمملكة المتحدة المراجع بإبداء الرأي عن المعلومات الأخرى التي يتضمنها التقرير السنوي المتضمن للقوائم المالية المراجعة ، ولكن إذا وجد المراجع أي تضليل أو حالات عدم اتساق مع المعلومات المدققة يجب أن يعمل على إزالتها لأن مصداقية القوائم المالية وتقرير المراجعة ربما تنخفض بوجود مثل هذه الحالات. ولكن التفسير الصادر في مارس 1997 م لنشرة معايير المراجعه SAS 8 يذكر أن الموقع غلى الإنترنت ليس مستندا بالمعنى المذكور في هذه النشرة ، لذلك لايطلب من المراجع قراءة المعلومات الأخرى على الموقع الإلكتروني أو تأمل اتساقها مع المستندات الأصليه . كتبت لكم هالجزء عشان تفهمون وش ابي بالضبط الله يخليكم ساعدوني دخلت موقع http://www.aicpa.org/ ومافهمت شي تكفون ساعدوني ضرووووووري

The REA Enterprise Ontology: Value System and Value Chain Modeling LEARNING OBJECTIVES The objectives of this chapter are to describe the components of a typical enterprise’s value system and value chain and to discuss the procedures for developing models of enterprise value systems and value chains. After studying this chapter, you should be able to: 1. Identify an enterprise’s external business partners 2. Identify the resources that are exchanged between an enterprise and its business partners 3. Develop a value system level REA model for an enterprise 4. Identify the business processes (transaction cycles) in an enterprise 5. Identify the resource flows between an enterprise’s internal business processes 6. Identify the economic events that cause the resource flows between an enterprise’s internal business processes 7. Develop a value chain level REA model for an enterprise 8. Explain how enterprises create value and describe Porter’s Value Chain Model 9. Explain how evaluating enterprise activities at the value system and value chain levels facilitates understanding the business process level VALUE SYSTEMS AND VALUE CHAINS We introduced the concepts of value systems and value chains in Chapter 2; we examine them more closely in this chapter. You may be surprised to learn that many of the critical steps of building an information system have little to do with programming a computer. The process begins with identifying the need for a business solution and acquiring a better understanding of the environment you plan to support and/or improve. You must examine that environment (the enterprise) from different perspectives and at different levels of detail. We believe the first level of detail you should consider is the least detailed—the big picture view that we call the value system level. You may have heard the saying “they couldn’t see the forest for the trees” used to describe those so mired in detail that they forget the big picture of what they are trying to accomplish. We believe that looking at the forest level of an enterprise first and trying to develop a plan for analyzing the enterprise a section at a time will help you keep your perspective and avoid getting mired in the detail. Obviously there is plenty of detail in which to get mired, so try to keep picturing the end goal and the plan for getting there to keep you on the path. Examining the value system level of a firm includes thinking about the enterprise’s mission and strategy. Understanding this level is crucial because later you must ensure that activities within the enterprise’s business processes are consistent with its overall mission and strategy. The REA ontology is about much more than developing information systems; it is about understanding enterprises. Everything an enterprise does should create value for its customers according to Michael Porter in Competitive Advantage.1 Creating value has a cost. For example, an enterprise that assembles automobiles creates something of value but also must pay for various inputs (e.g., materials, supplies, and time of employees). Porter computes an organization’s margin as the difference between value and cost. This calculation includes all value and all cost, much of which is difficult to measure financially, but which the REA value chain model can capture if measurements are available. The concept of creating value applies to both for-profit and not-for-profit organizations. For-profit organizations try to maximize their margins. Not-for-profit organizations, such as charitable or governmental entities, seek to maximize the goods and services they provide with the resources (funds) they receive. Over the long run, charitable and governmental organizations seek to optimize their services while matching outflows to inflows. Whether forprofit or not-for-profit, viable organizations provide goods and services that customers value in a cost-effective way. The main difference between for-profit and not-for-profit enterprises is that at the value system level, the input resources and output resources are paired with different external business partners. That is, some of the partners who give resources to the not-for-profit enterprises do not receive resources directly from the not-for-profit enterprises and some of the partners who receive resources from the not-for-profit enterprises do not give resources to the not-for-profit enterprises. The overall notion of input resources being transformed into output resources is still valid because one would expect that if the not-forprofit organization failed to provide the expected goods and services, its contributing external business partners would discontinue their contributions. Every organization seeks to create value by providing goods and services customers want. For example: • A grocery store creates value by providing food in a clean and convenient location for customers to purchase. • An airline company creates value by safely transporting passengers and cargo in a timely manner. • An automobile manufacturer creates value by producing safe, reliable vehicles to transport people and cargo. • A municipality creates value by providing essential community services (e.g., police protection, fire protection, emergency services, and utilities) to its citizens. Enterprises that provide goods and services of value to their customers will survive and grow while those that do not will shrink and die. Due to competition for scarce resources, each enterprise must provide value in a cost-effective manner. Although some organizations manage to defer their demise through deceit, disguise, or political influence, ultimately every organization has to answer to the final arbiter of value—the customer. Because enterprises need increased adaptability, effectiveness, and efficiency to remain competitive, most organizations find it essential to differentiate between the various business activities in which they engage. Obviously, organizations must look internally at each of their functions and develop capabilities in each area. They also must effectively integrate and coordinate all business functions. However, in today’s business world, an organization’s performance is increasingly affected by the world around it. You might work for the most internally cost-effective organization you can imagine, but it might be an unsuccessful organization. Why? Perhaps the organization has competitors who better meet the needs of customers, do a good job of outsourcing some business functions, or do a better job of creating effective strategic alliances with trading partners.2 To really understand and analyze an organization, you must understand more than internal operations and functions. You must look outside the organization at the industry, the suppliers, the customers, and all the other parties that affect organization performance. In other words, you must examine the enterprise at its value system level, and also consider how the enterprise’s value system interacts with the value systems of the other enterprises in its supply chain. An enterprise supply chain encompasses all of the enterprises involved in providing a product or service to an end customer. For example, Robert Scott Woodwind Shop purchases instruments from its suppliers as part of its value system level activities. Those suppliers had value systems of their own to make those instruments available for 2Outsourcing occurs when one organization finds another organization to perform some work. This is usually done when the outsourcing organization can’t complete the work (e.g., they do not have the capacity or the expertise) or when they identify another organization that can complete the work in a more cost-effective manner. Case in Point In the late 1970s and early 1980s when gas prices were rapidly rising and our oil supplies were in doubt, most new car buyers favored smaller, more gas-efficient automobiles. America’s automobile manufacturers had several lean years as they modified their automobile design to smaller, fuel-efficient vehicles. Over the next decade as the percentage of small cars increased, most parking lots adjusted the size of the parking stalls from 8 or 9 feet wide to 7 feet wide. But since 1987 the size of America’s cars has been getting bigger. In sprawling Western and Southwestern cities, the popularity of sport-utility vehicles and pickup trucks can make parking a hassle. Parking lots with larger parking stalls are now able to charge a premium price. Parking problems will likely increase as the popularity of the Hummer increases. The Hummer is the civilian adaptation of a military vehicle that is 8 feet wide, including the mirrors.* Chain Modeling sale to RSWS. Likely RSWS buys the instruments from the manufacturers; their value system levels would involve purchasing raw materials, labor, and manufacturing equipment from their suppliers. Those suppliers had value systems to make those items available for sale. Eventually managers must look at the entire supply chain to streamline interenterprise activities and gain efficiencies in operations. However, the best first step is to focus on the enterprise in the context of its immediate business partners, then to focus on the enterprise value chain and the internal business processes that comprise that chain. Once you understand the enterprise in the context of its immediate business partners and its internal processes, examine the more distant links on its supply chain. To complete a thorough cradle-to-grave analysis, many people use the value chain analysis approach originally proposed by Michael Porter.3 Porter illustrated that each firm is a “collection of activities that are performed to design, produce, market, deliver, and support its product.” You can see Porter’s Generic Value Chain in Exh 3–1. Although this diagram looks different from the value chain diagrams we use in this textbook, both types of value chain diagrams encompass the same set of activities. Porter’svalue chain is defined as a set of business activities that add value or usefulness to an organization’s products or services; the REA ontology defines the value chain as a set of business processes through which resources flow, with the assumption that value is added to the resources within each business process. The value chain is intended to show total value and consists of value activities and margin. Value activities are the physical and technological activities performed by an organization. Porter presented two types of value activities in his generic value chain: primary and support. Primary value activities consist of the events that create customer value and provide organization distinctiveness in the marketplace. They are the critical activities in running a business. Support value activities facilitate accomplishing the primary activities. Margin is the difference between total value and the cost of performing the value activities. Porter’s primary value activities include the following categories: • Inbound logistics—activities associated with receiving, storing, and disseminating inputs to the products or services • Operations—activities associated with transforming inputs into the final products or services • Outbound logistics—activities associated with collecting, storing, and physically distributing the products or services • Marketing and sales—activities associated with providing a means by which customers can buy products and the means for inducing them to buy • Service—activities associated with providing service to enhance or maintain the value of the products or services Porter’s support value activities include: • Procurement—the function of purchasing inputs to a firm’s value chain • Technology development—the know-how, procedures, or technology embedded in processes that are intended to improve the product, services, and/or process • Human resource management—activities involved in recruiting, hiring, training, developing, and compensating all types of personnel • Firm infrastructure—activities that support the entire value chain (e.g., general management, planning, finance, accounting, legal, government affairs, and quality management) In REA value chain analysis we also differentiate value activities in three event categories— operating events, information events, and decision /management events. We define and discuss these categories in Ch4. Value system and value chain analyses are valuable because they compel you to understand the internal operations of a firm as well as the forces and parties outside the firm that affect its ability to create value. The direct actions of an organization are only part of its overall value chain process. It is also important to look at external linkages, such as the activities of customers and suppliers, to understand the ability of an organization to create value. For example, some organizations may be more successful at creating value because they elicit quality responses from their customers and use the feedback to quickly change or upgrade their products. Other organizations may achieve success because they have worked effectively with their suppliers to reduce costs and improve the ability to respond to customer desires. A thorough analysis of the value system and value chain helps you to understand all the activities that are strategically relevant to an organization, not just the portion of activities in which an organization directly participates or controls. In Exh3–2 we illustrate how the value system and value chain activities are linked. In this diagram note that Suppliers encompasses suppliers of every type of resource, including employees, investors, and creditors, as well as those who supply products and services. VALUE SYSTEM LEVEL REA MODELING To develop a value system level REA model you must answer the question, “Who are the enterprise’s external business partners?” To answer this question, focus on resource flows and ask the question this way, “To whom does the enterprise give resources and from whom does the enterprise receive resources?” Recall from Chapter 2 that resources are defined as things that have economic value to the enterprise. Recall also from Chapter 2 that we are taking a pattern-based approach to developing enterprise information systems. Thus we want to consider what is true for most enterprises and then make adjustments as necessary for our particular enterprise. Most enterprise resources fit into one of the following categories: • Cash • Inventory (raw materials, finished goods, merchandise, parts, and supplies) • Labor • Property, plant, and equipment • Insurance • Services (such as advertising or government services) • Utilities (water and energy) To determine an enterprise’s external business partners, a helpful step is to examine which of these resources the enterprise provides or uses and then determine to whom they provide the resources and from whom they acquire the resources. To make matters even simpler, in the current economic environment cash is the universal resource for which most other resources are exchanged. Very seldom do companies engage in barter transactions (exchanges of a noncash resource for a different noncash resource). Therefore by concentrating on identifying the various partners to whom the enterprise pays cash and from whom the enterprise receives cash, you very likely have identified all the appropriate external business partners. Typically the external business partners fit into the following categories: EXH 3–2 • Vendors or suppliers (of various types of inventory, equipment, utilities, insurance, and services) • Employees • Investors and creditors • Customers Sometimes examining the cash outflows of an enterprise does not reveal a resource received in exchange. For example, when an enterprise pays cash to government agencies (such as the Internal Revenue Service) what resource does the enterprise receive in exchange? Some resources the government provides are easy to identify, such as a license to do business, or police and fire protection services. However, the amounts paid in taxes and fees to the government often exceed an identifiable resource received in exchange and we must simply label the resource as government services. Payments to charitable organizations pose a similar dilemma. If an enterprise donates money to a university, what resource does it receive in exchange? The enterprise must believe it receives a resource, because enterprises are assumed to make economically rational decisions. The enterprise may expect goodwill, an increased reputation in the community (in effect, advertising), or an advantage in recruiting the university’s students. Based on the assumption that the enterprise does in fact receive resources in exchange for these payments, hopefully you have figured out that government agencies and charitable organizations would be included in the external business partner category of vendors or suppliers. Once the resources an enterprise uses are identified and the external business partners with whom these resources are exchanged are determined, the information is portrayed in a diagram. The enterprise being modeled is represented as a circle or oval in the center of the diagram. Each external business partner is represented as a square or rectangle; these are placed around the outside of the circle that represents the enterprise. Arrows are drawn between the circle and the squares as appropriate to indicate the actual resource exchanges between the enterprise and its business partners. Let’s examine the RSWS example introduced in Chapter 2 to determine how the value system level REA model was constructed. The value system diagram from that example is reproduced in Exh 3–3. The first step in constructing this model is to examine the various resources RSWS uses in its operations. Cash is certainly used by RSWS. Let’s consider how the cash is used, to whom it is paid, and from whom it is received. We identify that cash is received from investors (for equity financing), from creditors (for debt financing), and from customers. Thus we draw a rectangle to represent the set of investors and creditors and another rectangle to represent the set of customers. Cash is received from investors and creditors because they expect to receive cash in exchange, therefore we simply draw an arrow from investors and creditors to RSWS and label it cash to represent those cash inflows. We draw another arrow from RSWS to investors and creditors to represent cash outflows to investors and creditors (e.g., for interest payments, dividends, principal repayments, and treasury stock purchases). Next we draw an arrow from customers to RSWS and label it cash to represent the cash inflows from customers. We realize that the reason customers give RSWS cash is because they expect RSWS to provide goods (e.g., instruments, accessories), repair services, or the use of goods (i.e., rental of instruments). Therefore we draw an arrow from RSWS to customers to indicate that RSWS provides those resources to its customers. We then inspect the narrative to determine what types of cash payments are made and to whom. We identify cash payments made to employees and realize that those payments are made in exchange for labor provided by our employees. Therefore we draw a rectangle to represent the set of employees. We draw an arrow from RSWS to employees to represent the cash outflows to employees and we draw an arrow from employees to RSWS to represent the labor inflow from employees. You might notice that there is no arrow to represent benefits such as health insurance paid to employees. Is it because RSWS doesn’t offer any such benefits or is it because they have forgotten to represent them? The answer is neither. Payments made for health insurance for employees is a cash outflow to suppliers made by RSWS on behalf of the employees. The actual insurance is an outflow from the health insurance supplier to the employees and is outside the scope of RSWS’s value system model, which only examines the direct resource flows between RSWS and its external business partners. This leads us to the other external business partner for RSWS— the suppliers (some enterprises may call these vendors). Suppliers is the set of all nonemployee individuals or organizations from which an enterprise acquires goods and services. We draw a rectangle to represent the set of suppliers, an arrow from RSWS to suppliers to indicate the cash outflow, and an arrow from suppliers to RSWS to indicate the inflow of goods and services. VALUE CHAIN LEVEL REA MODELING Once the value system level analysis is complete, much of the initial value chain analysis has also been completed. This level of analysis focuses on the resource flows between its internal business processes. A business process is a series of activities that accomplishes a business objective: adding value to input resources. Once you have identified the resources flowing into and out of the enterprise, examine what the company does with its input resources and how it generates its output resources. As business processes use up resources, they should be producing resources worth more to the enterprise than those used up. As noted earlier, enterprises create value by developing and providing the goods and services customers desire. Goods and services are provided through a series of business processes. Regardless of the type of goods or services provided, each organization has at least three business processes (see Exh 3–2): 1. Acquisition/payment process: The objective of the acquisition/payment process is to acquire, maintain, and pay for the resources needed by the organization. Many resources are required including human resources, property, plant, equipment, financial resources, raw materials, and supplies. Resources are acquired from external entities like suppliers or vendors. These are the inputs required by the organization to provide goods and services to its customers. Because the acquisition of financial resources and the acquisition of human resources have complexities not found in the acquisition of other goods and services, many enterprises separate these activities into additional business processes, called the financing process and the human resources process, that we cover separately in later chapters. 2. Conversion process: The objective of the conversion process is to convert the acquired resources into goods and services for customers. The raw inputs are transformed into finished goods and services by this process. 3. Sales/collection process: The objective of the sales/collection process is to sell and deliver goods and services to customers and collect payment. The finished goods and services from the conversion process are sold to customers (external entities) in exchange for their payment, usually in the form of cash. Creating a value chain model that illustrates the linkages between these processes requires understanding of two very important concepts in the REA ontology: duality and stockflow. These concepts characterize the core economic phenomena of an exchange. As noted earlier, enterprises are assumed to make rational economic decisions. Rational economic theory precludes decision makers from giving up something with no expectation of anything in exchange. For every event in which an enterprise gives something up we expect a related event in which the enterprise receives something. The causal relationship between a give event and a take event is a duality relationship. Stockflow is defined as the inflow or outflow of a resource. Stockflow relationships exist between give events and resources (these stockflows are outflows) and between take events and resources (these stockflows are inflows). The value chain level of the REA ontology is constructed based on these two concepts. Geerts and McCarthy say, “Duality relationships are the glue that binds a firm’s separate economic events together into rational economic processes, while stockflow relationships weave these processes together into an enterprise value chain.”4 The first step in creating a value chain model is to write the enterprise script to identify the business processes that need to be included in the value chain. We use the value system level model along with whatever other information we have such as a narrative description about the enterprise’s activities. The second step in creating a value chain model is to draw the resource flows to link the business processes together. The third step is to determine the economic exchange events and the duality relationships that make up the core of each business process in the value chain. An example will clarify these steps. Let’s revisit our RSWS example. In Exh 2–3 (reprinted here as Exh 3–4) we portrayed a summarized value chain level that would be the result of the first two steps. After going through steps 1 and 2 to reconstruct this model, we discuss step 3 and illustrate the resulting detailed value chain model. Step 1: Write the Entrepreneurial Script To complete this step, we examine the typical scenes of the entrepreneurial business script to see which of the typical scenes RSWS has. Based on our value system level analysis, the typical script pattern, and the narrative description of RSWS we write RSWS’s script as follows: • RSWS gets cash from investors and creditors • RSWS engages in value-adding activities • uses cash to buy instruments, raw materials, and overhead from vendors • uses cash to acquire labor from employees • uses materials, equipment, and overhead to manufacture accessories and to provide repair services • sells instruments, accessories, and repair services to customers for cash • RSWS pays cash to investors and creditors The first and last scenes together comprise the financing process; in scene 2, the subscenes are (in order) the acquisition/payment process; the human resources (payroll) process; the conversion process; and the sales/collection process. Keep in mind that all of these scenes and subscenes come directly from our value system level analysis except for the “uses materials, equipment, and overhead to manufacture accessories and to provide repair services.” Because the subscene doesn’t involve resource exchanges with external business partners, it is not modeled at the value system level. Thus you must be careful when developing your value chain model to include not only the scenes that you derive from the value system level but also any business processes that add value via internal resource transformations. EXH 3–4 Step 2: Connect the Scenes with Resource Flows Once all the scenes are identified they need to be combined to form a value chain (at which point no distinction is made between scenes and subscenes). The resource flows provide the link from one scene to the next. Once the cash is acquired in the financing process, it is used as input for the acquisition/payment and human resource processes, where it is transferred out to external business partners in exchange for instruments, raw materials, overhead, and labor. Because the value chain model only illustrates the internal processes, we don’t show the cash outflows from the acquisition and payroll processes to the external partners, nor do we show the related resource inflows from those external partners. From this perspective we view the acquisition process as one that uses up cash and produces materials, equipment, overhead, and instruments; and we view the payroll process as one that uses up cash and produces labor. We view the conversion process as one that transforms the labor, materials, equipment, and overhead into the accessories and repair service resources. The sales/collection process is then viewed as one that uses up instruments, accessories, and repair services and obtains cash. The assumption is that in each of these scenes the resources produced are worth more than the resources used up; thus value is added to the enterprise in each link of the chain. Step 3: Specify the Economic Exchange Events within Each Scene The third step in creating the value chain diagram adds more detail to the diagram that clarifies how each scene’s representation in the value chain diagram provides the starting point for a business process level model representation. This step entails depicting the economic exchange events inside each scene’s bubble on the value chain diagram. Each scene must contain at least one economic increment (take) event and at least one economic decrement (give) event. You can use the resource flows to determine what events are needed. This analysis also helps you to determine whether a scene in your value chain should be decomposed into multiple scenes. The general rule to follow for this step is that each process must have an economic decrement event to match up with each resource inflow and an economic increment event to match up with each resource outflow. The idea is that if a resource is flowing into a process, the process must include an event that uses it up (either by transferring it to an external partner or by transforming it into a different resource). Similarly, if a resource is flowing out of a process, the process must include an event that produced the resource (either by transferring it in from an external business partner or by creating it as a transformation of some other resources. In our RSWS example, let’s add detail first to the financing process. Because cash is a resource inflow to that process, the process must include an event that uses it up (i.e., a cash disbursement event). Cash is also a resource outflow from financing, so the process must include an event that acquired it (i.e., a cash receipt event). The cash receipt and cash disbursement events are linked via a duality relationship. So we draw two event boxes inside the financing process bubble and connect them via a diamond (relationship symbol) labeled with the word duality. We label the events cash receipt and cash disbursement. Note that even though the cash flows from the financing process to multiple other processes, the data attributes of all cash receipts are likely the same so we consider cash receipts for all purposes as part of the same event set. The fact that cash got used for different purposes doesn’t matter. Next we examine the payroll process. Because cash is a resource inflow, the process must include an event that uses it up (i.e., a cash disbursement event). Notice that the enterprise will likely have only one cash disbursement event set that encompasses all cash disbursements made for all purposes, but we must depict the event set in each business process that uses cash. The payroll process generates labor as its resource outflow, so there must be an event within the payroll process that obtains that labor (labor acquisition, an event that transfers the labor in). So we draw two event boxes inside the payroll process bubble and connect them via a diamond (relationship symbol) labeled with the word duality. We label the events cash disbursement and labor acquisition. The acquisition/payment process is similar to the payroll process. Cash is a resource inflow to acquisition/payment, so the process must have an event that uses it up (i.e., a cash disbursement event). The acquisition/payment process has instruments, materials, services, and equipment as outflows, so the process must include an event that obtains those things from external sources (i.e., an acquisition event set). Here we must determine whether the same data attributes are recorded for acquisitions of each of these types of items. For any that are different, the events should be modeled separately and the recommendation would be to make separate acquisition cycle bubbles. Let’s say we determine that RSWS records all acquisitions using a common set of forms and captures the same data attributes for them. Thus we need only one acquisition event set and only one acquisition process (scene). We draw two event boxes inside the acquisition/payment process bubble and connect them via a diamond labeled with the word duality.We label the events cash disbursement and acquisition. Next we examine the conversion process. The conversion process is typically the most complicated scene. Our value chain diagram shows input resource flows as materials, equipment, labor, and overhead. That indicates our conversion process must have events that use up each of those items. We determine that raw materials are used up as they are issued into a manufacturing or repair job so we draw a box labeled material issue.We note that employee labor is used up through the employees’ involvement in labor operations, so we draw a box labeled labor operation. Equipment and overhead are used up in machine operations, so we draw a box labeled machine operation. Next we need to determine what event produces the finished accessories and/or repaired instruments. We determine that for RSWS every repair service and each production run for a batch of parts or ccessories is considered to be a work in process job. Thus we add a box labeled WIP Job.We realize that the material issues, labor operations, and machine operations are economic decrement events (they use up resources) that are matched with the WIP job, which is an economic increment event (it produces resources). Therefore we draw a diamond symbol to connect all four boxes and label it as duality. Now all our scenes are detailed except for the Sales/Collection process. We see that the input resources are the instruments (from the acquisition process), and the manufactured accessories and repair services (from the conversion process). The instruments get changed into cash either by selling them or renting them to customers. The repair services and manufactured accessories are also changed into cash by selling them to customers. As with the acquisition process, we need to make a choice as to whether there is a common sale event set for which the same set of data attributes can be maintained, or whether the activities are dissimilar enough to warrant being maintained as separate event sets. For this example, we assume RSWS uses the same set of forms and captures the same data attributes for each of these revenue-generating activities, so we combine them into one economic decrement event called sale. The output resource flow is cash, indicating that the process must include an event that produces or obtains the cash, in other words an economic increment event called cash receipt. We draw two boxes with a duality relationship connecting them; we label one box sale and the other box cash receipt. Now our value chain is complete (see Exh 3–5) and may be used to facilitate creation of the business process level models for RSWS. We discuss that process in detail in Ch4.

Labor acquisition event //.......... an economic increment event in which employee labor is purchased; each instance covers some time period; often represented by a timecard document Labor operation //...... an economic decrement event that uses up the employee labor resource Labor type resource //...... a resource-type entity set that represents a list of the kinds of labor activities that can be performed in labor operations Lapping //.............. a method of stealing cash whereby an employee steals cash from a customer payment, delays posting a payment to the customer's account, and then uses funds from a subsequent customer payment to post to the first customer's account; the process continues with the employee continually stealing from subsequent customer payments to post as prior customer payments Left join //............. a combination of tables based on a common attribute that includes unmatched records from the first table in the join and does not include unmatched records from the second table in the join; a partial outer join Level zero DFD //............. a high level (just under context level) representation that depicts only the very high-level processes within an information system Linkage relationship //..... an association between two resources to represent the fact that one of the resources is composed of the other; in the conversion cycle this provides a means for identifying the materials a finished good is composed of and the types of labor that are needed to produce a finished good Load (high and low) //........... the percentage of data values for an attribute that are non-null; if most cells in a column have actual values, the load is high; if most cells in a column have null values, the load is low Logical access control //........... restricting unauthorized access to the programs and data in systems Logical level implementation compromise //............. an implementation compromise made when converting a conceptual model into database objects Logical model //............ in database design, a model into which the conceptual model is converted once the type of database software to be used has been chosen (e.g., relational or object-oriented); hardware independent and somewhat software independent (if relational is chosen as the database type, then any relational software may be chosen but object-oriented software may not) Logical operator //............ Boolean search terms used in queries to define which records are included in the query result (examples include AND, OR, and NOT) Machine operation //............ an economic decrement event that partially consumes a machine in the conversion cycle Margin //............. the difference between value and cost in Porter's generic value chain model Marketing and sales //.......... primary value activities in Porter's generic value chain; activities associated with providing a means by which customers can buy products or services and the means for inducing them to buy Marketing event //........... an activity such as a sales call, advertising campaign, or promotion intended to inform customers about products and/or services and persuade them to trigger the sales/collection process; an internally instigated instigation event Master reference check //............. verifies that an event/transaction record has a corresponding master record to be updated Materiality of risk //........... a function of the size of the potential loss, its impact on achieving the enterprise's objectives, and the likelihood of the loss Materialization of task as entity //........... a conceptual model level implementation compromise in which an activity that could be reengineered is established as an entity (base object) Mathematical operation //........... a calculation that manipulates data values Maximum participation cardinality //........... represents the maximum number of times each instance of an entity set may participate in a relationship; legal values are one and N (many) Minimum participation cardinality //............ represents the minimum number of times each instance of an entity set must participate in a relationship; legal values are zero (optional participation) and one (mandatory participation) Model //........... a representation intended to serve as a plan or blueprint for something to be created; an object that represents in detail another (usually larger and more complex) object; used in systems design to help control complexity Monitoring //.............. one of COSO's five interrelated components of an internal control system; the process of assessing the quality of internal control performance over time and taking corrective actions as needed Move ticket //............. a document typically used in the conversion cycle to indicate the actual use of raw materials (i.e., the materials issuance event) Mutual commitment event //............. an event that obligates an enterprise to participate in at least two future economic events, one that increments a resource and another that decrements a resource Name conflict //............. a form of entity conflict in which two different entities are assigned the same name or a single entity is assigned two different names Noncash related economic event //.............. an activity in which a resource other than cash is increased or decreased Null to zero (Nz) function (in Microsoft Access) //.............. a Microsoft Access procedure used in querying that treats null values as if they are zeros Null value //............ a blank cell in a database table; a cell into which no data has been entered Object //............ a thing that has a physical or conceptual existence One-fact, one-place rule //........... a principle in database design that prohibits a pairing of a candidate key value with another attribute value from appearing multiple places in a database table and also prohibits multiple pairings of candidate key values with other attribute values in the same place; helps to ensure well-behaved relational tables Open purchase order file //............. a repository that contains information about purchase order events that have not yet been fulfilled by purchase events; a collection of unfilled purchase orders Open purchase requisition //............ a purchase requisition that has not yet been fulfilled by a purchase order Open sales invoice file //.......... a repository that contains information about sales events that do not yet have related cash receipts Open sales order file //............ a repository that contains information about sale order events that have not yet been fulfilled by sale events; a collection of unfilled sale orders Operating event //............. an activity performed within a business process to achieve enterprise objectives that does more than just communicate information (e.g., economic events, commitment events, and some instigation events) Operations //............ primary value activities in Porter's generic value chain; activities associated with transforming inputs into final products or services Operations list //.............. a document that identifies the labor types needed to create a finished good; captures the same information as the linkage relationship between labor types and finished goods Opportunity //............ a potential for reward Outbound logistics //........... primary value activities in Porter's generic value chain; activities associated with collecting, storing, and physically distributing products or services Outer join //............ a combination of tables based on a common attribute that includes unmatched records from both sides; accomplishes a set union of the tables Outflow //.............. the flowing out (disbursement or distribution) of a resource from an enterprise Packing slip //.......... a document that identifies the goods that have been shipped to a customer Parameter query (in Microsoft Access) //............ a query in which variables are used in lieu of data values as part of the query's selection criteria; allows the user to specify the data value to be used each time the query is run, thereby allowing reuse of the same query many times for different decisions Participation cardinalities //............ represents business rules for how many times an instance of an entity set is allowed to participate in a relationship Participation relationship //............. an association between an event and an internal or external agent Password //............. a unique identifier that only an authorized user of a system or application should know and that the user is required to enter each time he or she logs onto the system; a weak form of protection; a logical access control Pattern //........... a template or configuration from existing scenarios that can be used to make sense of other scenarios Paycheck //............. a document representing a cash disbursement (economic decrement event) to an employee Payroll clerk //.............. an internal agent responsible for accomplishing the cash disbursement event in the payroll transaction cycle Performance review //............ a review of some element of an enterprise's performance that provides a means for monitoring (e.g., comparison of actual data to budgeted or prior period data; comparison of operating data to financial data; and comparison of data within and across various units, subdivisions, or functional areas of the enterprise) Personal identification number (PIN) //.......... a numeric identifier used as a logical access control to authenticate a user; similar to a password Physical database model //............ a working database system that is dependent on the hardware, software, and type of software chosen during the design stages Physical level compromise //............... an implementation compromise made when entering the logical database objects into a database software package to create the working database Picking slip //............ a document that identifies the goods that have been taken out of the warehouse and made available to be shipped Posted key //............ an attribute of a database table that is added to another database table to create a link between the tables Preventive control //........... a control activity that focuses on preventing errors or irregularities either from occurring or from being entered into the enterprise information system Primary key attribute //........... a characteristic that uniquely and universally identifies each instance in an entity or relationship set Primary value activities //............. the events that create customer value and provide organization distinctiveness in the marketplace; events viewed as the critical activities in running a business Primitive DFD //............ the lowest level (most detailed) representation of a system process; cannot be further decomposed Primitive level data //............ data that cannot be decomposed into any component parts Procurement //.......... a support value activity in Porter's generic value chain; the function of purchasing inputs to a firm's value chain Production employee //........... an internal agent involved in labor operations and production runs in the conversion process; a worker who participates in the manufacture of finished goods Production order document //............ a document that captures information about a production order event Production order event //............ an event that represents the enterprise's commitment to engage in a future economic increment event (a production run) that will increase the finished goods resource Production run //........... an economic increment event that increases the quantity of a finished goods resource Production supervisor //.......... an internal agent who authorizes events in the conversion cycle Project //......... a relational algebra operator (pronounced pro-JECT' rather than PRO'-ject) that specifies a vertical subset to be included in the query result Proposition relationship // ........ an association between an instigation event and a resource or resource type; often specifies quantity and proposed cost or selling price for the item(s) identified as needed Purchase //........ an economic increment event in which services or the title to goods transfers from a supplier to the enterprise; also called an acquisition Purchase order //......... a mutual commitment event in which a supplier agrees to transfer title of goods to the enterprise at an agreed upon future time and price and the enterprise agrees to pay for those goods; a document reflecting the terms of the mutual commitment event Purchase requisition //......... an instigation event in which the need for goods or services is identified; an internal document that communicates this need to the enterprise purchasing function Purchase return //......... an economic increment reversal event in which the title to goods previously transferred from a supplier to the enterprise is transferred back to the supplier Query //....... a request for information submitted to a database engine Query by example (QBE) //...... a type of query interface intended to be more "point and click" in nature than is SQL; in this interface the user creates a visual example of what tables and fields should be included in a query result and specifies any calculations to be included Query grid (in Microsoft Access) //........ the lower half of the QBE view into which fields are dragged and in which aggregations or horizontal calculations may be created to establish the desired logic for a query Query window (in Microsoft Access) //....... the screen in which queries are created; user may toggle back and forth between QBE design, SQL design, and Datasheet (result) views within the query window Range check //........ an instruction in a computer program that compares entered data to a predetermined acceptable upper and/or lower limit and rejects data that falls outside the specified limits unless special authorization is obtained Raw material //....... an input resource in the conversion process that is completely used up in the transformation to finished goods Raw material issuance //........ an economic decrement event involving the using up of raw materials in the production process; the raw materials are usually transformed into finished goods and lose their own identity and nature in the process Raw material requisition //....... a commitment event whereby the inventory clerk or warehouse supervisor commits to the production supervisor to transfer materials from the materials warehouse to the production floor; assumes the raw materials are available within the enterprise and reserves them for use REA core pattern //........ the original version of the REA model at the business process level; includes resources, economic events and agents, duality relationships, stockflow relationships, and control (participation) relationships Read-only file designation //......... a property used to mark data as available for reading only; the data cannot be altered by instructions from users, nor can new data be stored on the device Reality //........ that which exists objectively and in fact REA ontology //........ a domain ontology founded by Bill McCarthy at Michigan State University that attempts to define constructs that are common to all enterprises and demonstrate how those constructs may be represented in an integrated enterprise information system. The REA ontology is made up of four layers: the value system, value chain, business process, and task levels. Reasonableness check //....... an instruction in a computer program to verify whether the amount of an event/ transaction record appears reasonable when compared to other elements associated with each item being processed Receiving report //...... a document that lists the items and the quantities and condition of each item received in an acquisition event; the receiving report identifier is often used as the identifier for the acquisition event Reciprocal relationship //....... a relationship between a commitment to an economic increment and a commitment to an economic decrement; the commitment level equivalent of the duality relationship; in the conversion cycle, represents a schedule of what is to be produced and what will need to be used and consumed in the production process Record //....... a row in a relational database table Redundancy //......... in database design, duplicate storage of the same information Reengineering //........ the redesign of business processes or systems to achieve a dramatic improvement in enterprise performance Referential integrity // ........ a principle in relational databases that requires a value for a foreign key attribute to either be null (blank) or to match exactly a data value in the table in which the attribute is a primary key Relational algebra // ...... the original data manipulation (querying) language that was constructed based on set theory and predicate logic as part of the relational database model; primary operators include Select, Project, and Join; however, other operators are also part of the relational algebra Relational database //....... a collection of tables that meet the criteria of the relational model Relational model //......... a logical level database design model developed by E. F. Codd based on set theory and predicate logic; primary constructs are relations (tables) that represent entities and relationships between entities Relational table //......... a relation; a two-dimensional storage structure (i.e., a storage structure with rows and columns) that represents either an entity or a relationship between entities and that adheres to relational principles such as entity integrity, referential integrity, and the one-fact, one-place rule Relationship //............ an association between two or more entity sets Relationship conflict // ........ a discrepancy in the assignment of participation cardinalities or in the label used to name the same relationship in different view models Relationship layout (in Microsoft Access) //........ a window in which relationships between tables are visually depicted Remittance advice //........ a document (usually the portion of a customer invoice or statement that says "return this stub with payment") that advises the enterprise the customer is remitting payment; often used as the identifier for a cash receipt event Rental // .......... an economic decrement event that does not involve the transfer of title of goods, but instead involves a transfer of the right to use goods for an agreed upon length of time; begins when the right to temporary possession of the goods transfers from the lessor to the lessee and ends when possession of the goods transfers back from the lessee to the lessor Repeating group //......... multiple facts stored in one place; the same value of a key attribute field associated with multiple values of another attribute Representation //.......... a surrogate for something; a symbol that closely resembles the actual construct; the closer the resemblance to the real object, the better the representation Request to return goods //......... notification to a supplier of the enterprise's dissatisfaction with goods that seeks permission to return those goods in lieu of making payment (or in exchange for a refund) Required data entry (field property) (in Microsoft Access) //........... a choice specified in table design view; a user will not be allowed to enter a record into the table without including a value for any field(s) for which this property is set to "yes"; a user may leave any field except the primary key field(s) blank for which this property is not set to "yes" (Microsoft Access automatically enforces entity integrity so there is no need to set the required data entry field property to "yes" for primary key fields) Reservation relationship //......... an association between a mutual commitment event and a resource or resource type; often specifies quantity and budgeted cost or selling price for the item(s) involved in the agreement Resource // ......... a thing of economic value (with or without physical substance) that is provided or consumed by an enterprise's activities and operations Resource flow // ......... the increase or decrease of a resource as the result of an event Resource inflow //........ the increase of a resource as the result of an event Resource outflow //......... the decrease of a resource as the result of an event Reversal relationship //.......... an association between an economic reversal event and a resource or resource type; often specifies the quantity and cost or selling price information for the item(s) involved in the event Right join //....... a combination of tables based on a common attribute that includes unmatched records from the second table in the join and does not include unmatched records from the first table in the join; a partial outer join Risk // ........... an exposure to the chance of injury or loss Risk assessment //......... one of COSO's five interrelated components of an internal control system; the identification and analysis of relevant risks associated with the enterprise achieving its objectives; forms the basis for determining what risks need to be controlled and the controls required to manage them Row //.......... the data attribute values that apply to a single instance of an entity or relationship set as represented in a relational database table Sales/collection process //......... transaction cycle in which goods or services are exchanged to customers or clients for cash or some other form of compensation Sales call //........... An internally initiated instigation event; typically involves a sales representative calling on a customer, either via telephone or in person, to describe the features of one or more products or services Sales invoice // ........... a document used to communicate to a customer the fact that the enterprise has fulfilled a commitment to transfer title of goods to the customer; sometimes also serves as a request or reminder for the customer to fulfill its commitment and remit payment to the enterprise Sales order //........... a mutual commitment event in which the enterprise agrees to transfer title of goods to a customer at an agreed upon future time and price and the customer agrees to pay for those goods; a document reflecting the terms of the mutual commitment event Sales return //......... an economic decrement reversal event in which the title to goods previously transferred to a customer transfers back to the enterprise Schedule //......... a mutual commitment event in the human resource business process wherein the employee agrees to provide labor as specified in the schedule and the enterprise commits to pay the employee the contracted wage rate for the labor provided Schema //........... the column headings, or intension, of a relational database table Script //.......... a sequence of events that typically occur in combination with each other Select //........... a relational algebra operator that specifies a horizontal subset to be included in the query result Select-From-Where //........... the format of SQL queries; the Select clause specifies a vertical subset to be included in the query result; the From clause specifies which table(s) are to be queried and any subgrouping to be done; the Where clause specifies a horizontal subset to be included in the query result and, if multiple tables are included, helps to define the join Semantic orientation //.......... a goal of REA-based systems that requires objects in the system's conceptual model to correspond as closely as possible to objects in the underlying reality Separation (or segregation) of duties //......... the structuring of employees' job functions such that one employee is prohibited from performing two or more of the following functions: authorization of transactions involving assets, custody of assets, record keeping, and reconciliation; reduces the opportunity for one employee to steal enterprise assets and to conceal the theft in the normal course of his or her work Sequence check //....... a control used to verify the records in a batch are sorted in the proper sequence and/or to highlight missing batch items Service //.......... primary value activities in Porter's generic value chain; activities associated with providing service to enhance or maintain the value of the products or services Service engagement //........ an economic decrement event in which the enterprise transfers services to a customer Service type // ......... a kind of service an enterprise has the ability to provide to customers; a resource type Shares of stock // ....... units that represent the holder's right to share in various ownership interests of an enterprise Show Table window (in Microsoft Access) //......... a screen from which the user may choose which table(s) to include in the relationship layout or in a query Simple attribute //......... a characteristic of an entity or relationship that cannot be further decomposed into component characteristics Smart card or token //.......... a logical access control that authenticates a user through a hardware device combined with a log-in password process; the smart card generates a random code that changes at predetermined intervals and must be matched against the host system; the user must also enter a password to gain access to the system SQL view (in Microsoft Access) //....... a mode for viewing the underlying SQL statement for a query; even if a query was created in QBE mode, Microsoft Access generates a corresponding SQL statement that the user may view to evaluate the query's logic Statement on Auditing Standards No. 94 //........ an auditing statement that largely established current standards for internal control Static derivable attribute //....... a derivable attribute for which the derived value will not change if additional transaction data is entered into the database Stockflow relationship //...... an association between an economic event and a resource or an association between an economic reversal event and a resource; often specifies quantity and actual cost or selling price for the item(s) involved in the event Stock issuance commitment event //..... an equity financing agreement that commits an investor to provide a determinable cash dollar amount (stock proceeds) on a specified date Stovepipes //..... functional areas structured such that the only pathways for communication are at the top (i.e., between the managers of each area); also called functional silos Strategy //....... an enterprise's planned course of action for achieving an objective Structured Query Language (SQL) //......... a query language developed to enable the performance of multiple operations in a single query and to use a standard format for every query statement (Select-From-Where) to simplify the task of query development Structuring orientation //.......... a goal of REA-based systems that demands the use of a pattern as a foundation for the enterprise system to facilitate automated reasoning by intelligent software interfaces to the enterprise system Sum //......... the mathematical total of a column of numerical data values Supplier //........ a person or organization from which an enterprise purchases goods or services Supply chain // ....... the entire network of enterprises (e.g., retailers, wholesalers, transportation firms) involved in providing a particular product or service to an end customer Support value activities //......... in Porter's generic value chain, activities that facilitate accomplishing the primary value activities Symbol //.......... something that stands for or represents something else Synonym //....... a word that has the same meaning as one or more other words Syntax //....... the formatting rules of a query language (and also other types of languages) System flowchart //........ a graphical representation of the inputs, processes, and outputs of an enterprise information system; includes details about the physical as well as the logical aspects of the system components Task level REA model // ...... a task is a workflow step or activity that may be changed or eliminated without fundamentally changing the nature of the enterprise and therefore should not serve as a foundational element in an enterprise information system; task level models in the REA ontology are graphical representations of workflow processes for which there is no identified pattern Technology development //......... support value activities in Porter's generic value chain; the know-how, procedures, or technology embedded in processes that are intended to improve the product, service, and/or process Threat //...... a situation or event that causes possible or probable loss to a person or enterprise Timecard //......... the primary document prepared by the enterprise in conjunction with the economic increment event; may be completed on a daily, weekly, or other basis; is typically completed by employees and approved by supervisors; lists the times employees started working (punched in) and stopped working (punched out) for each day in the covered time period Token //.......... an individual object; token-level representation uses a separate token for each individual instance in the piece of reality that is being modeled Training //...... the provision of education to employees to further develop their skills and/or knowledge Transfer duality relationship //...... an association between economic increment and decrement events in which the resource(s) decremented are traded for the incremented resource(s) Transformation duality relationship // .......... an association between economic increment and decrement events whereby the resource(s) decremented are changed into the incremented resource(s), i.e., the incremented resource(s) is created from the decremented resource(s) Tuple //....... a row in a relational database table Type // ......... a category into which individual objects may be classified; type level representation uses one type to represent as many individual instances as fit the category Typification //....... a relationship between an entity and an entity type; allows for storage of characteristics of entity categories Use stockflow relationship //........... a relationship between a resource and an economic decrement event whereby the resource is completely subsumed by the decrement (i.e., the resource is completely used up) Validity check //........ an internal control in which a comparison is made between entered data and prespecified stored data to determine whether the entered data is valid Valid sign check //....... an internal control used to assess whether a field's sign (positive or negative) makes sense; used to highlight illogical values, particularly balances in master file records Value chain //........ the interconnection of business processes via resources that flow between them, with value being added to the resources as they flow from one process to the next Value chain level REA model // a representation that depicts the interconnected business processes for an enterprise, the resource flows between the processes, and the duality relationships within each process Value system //....... an enterprise placed into the context of its various external business partners such as suppliers, customers, creditors/investors, and employees Value system level REA model // a representation that depicts the resource exchanges in which an enterprise engages with external business partners Vendor invoice //......... a document sent by a supplier to the enterprise to communicate the fact that the supplier has fulfilled its commitment to transfer title of goods to the enterprise; sometimes also serves as a request or reminder for the enterprise to fulfill its commitment and remit payment Vertical calculation //....... a computation that is a summarization of data values within a single column; also called an aggregation function Vertical subset of a table //........ a part of a table that includes only some of the table's columns (but includes all the rows) View integration //....... the process of combining separate conceptual models into one comprehensive model View modeling //.......... the creation of conceptual models to represent separate parts (usually transaction cycles) of an enterprise Virtual close //....... the ability to produce financial statements without actually closing the books; often touted as a benefit of ERP system software Voice recognition technology //........ used for internal control, creates a digital representation of a person's voice and stores it in a database; to access a resource the person speaks into a device; the spoken voiceprint is compared to the stored voiceprint and the person is denied access if the voiceprints do not match Volatile derivable attribute //..... a derivable attribute for which the derived value will change if additional transaction data is entered into the database Withholdings // .... employee pay amounts retained by the employer to remit to governmental or other agencies on behalf of the employee (e.g., social security, income tax, health insurance premiums) Workflow //......... detailed procedural steps and activities used to accomplish events and business processes in enterprises XBRL //..... Extensible Business Reporting Language; a tagging language used to identify data values of business reporting line items such as financial statement elements XML //..... Extensible Markup Language; a tagging language used in the creation of websites .

Access control matrix // ....... identifies the functions each user is allowed to perform and what data and programs the user can access once he or she gains access to the system Acquisition/payment process //...... transaction cycle in which cash or some other form of compensation is disbursed in exchange for goods and services; encompasses all activities associated with the purchase of and payment for those goods and services; also called the "procure-to-pay" mega-process or the expenditures cycle Ad hoc querying //....... direct retrieval of information by end users from a database whereby the retrieval was not planned (i.e., no preformulated queries or interfaces were developed in anticipation of needing the information) Agent //...... an individual, department, division, or organization that participates in the control and/or execution of one or more events Aggregation function //........ a mathematical operation used in querying to summarize information within a single column; also called a vertical calculation Application control //....... a feature created in a software program to help ensure transactions are valid, properly authorized, and completely and accurately processed Areas of responsibility //.......... departments, sections within a department, or individual employees within a department; used in system flowcharting to clearly identify changes in accountability for a document as the document moves through the system Artificial construct // .......... a thing that is artificially created or developed as opposed to something naturally occurring; also called an artifact Attribute //........ a characteristic possessed by an entity or a relationship Attribute conflict //......... differences in the list of characteristics identified as important for describing the same entity or relationship in various view models; resolve in view integration by including a set union of the attributes for the entity or relationship in the integrated view Back-office systems //.......... activities or systems that are only seen and used by people within enterprises; external partners, such as vendors and customers, do not usually see back-office activities or systems Backup // ......... a duplicate copy of a current data file Balanced DFD //......... data flow diagrams at different levels of detail (e.g., context level and level zero) that are consistent in showing system inputs and outflows Base object //........ a foundational building block of an enterprise information system; because they are foundational, removal of base objects causes serious problems and requires rebuilding of the system Batch control total //.......... an internal control used to verify that all transactions within a batch were processed correctly Bill of lading //......... a document that indicates transfer of custody of goods from the enterprise to a common carrier; includes details about how many boxes made up the shipment and the dimensions and/or weight of those boxes Bill of materials //........ a document that identifies the types and quantities of raw materials needed to create a finished good item Biometric access control //......... use of biological features such as fingerprints, palm prints, retina eye patterns, signatures, or voices to authenticate users and determine whether to allow them to access a resource Bolt-on application //......... software programs that can be added to existing ERP software applications Bonding //....... the process of purchasing insurance on the employees who handle cash for an enterprise; the insurer performs background checks on the employees, determines the likelihood the employees will steal from the enterprise, and agrees to compensate the enterprise in the case of employee theft; primarily a corrective control Budget //......... a plan for future inflows and/or outflows of resources Business-entrepreneur script //............ the stereotypical sequence of enterprise events that says (from the enterprise's point of view) the enterprise gets some money, engages in value-added exchanges, pays back the money, and lives off the profit Business interruption //.............. a temporary halt in normal operations due to an incident, such as a threat or catastrophe Business process //........... a term widely used in business to indicate anything from a single activity, such as printing a report, to a set of activities, such as an entire transaction cycle; in this text, business process is used as a synonym of transaction cycle Business process level REA model //......... a representation of an enterprise's resources, events, agents, and appropriate relationships between them within one or more transaction cycles; this conceptual representation is typically used to design the logical enterprise database design Business process risks //........... possibilities of loss and activities intended to mitigate such loss associated with actual business process objects, including resources, events, agents, and relationships among resources, events, and agents Cardinality pattern // the complete specification of minimum and maximum cardinalities of the entities that participate in a relationship Cash disbursement/cash disbursement economic event //........... an event that has the effect of decreasing cash; also called a payment Cash flow budget //......... a plan that delineates expected future cash inflows and outflows Cashier //............ a person who handles cash transactions on behalf of an enterprise Cash receipt/cash receipt event //........... an event that has the effect of increasing cash Cash requisition event //.............. the identification of need for cash Cash resource // ............ usually a list of cash accounts (whether in banks or in petty or on-hand accounts) owned by an enterprise; in essence, a resource type Check //............. a document used to authorize the transfer of cash from one person or enterprise to another Check digit //............. a number that is appended to and maintained as a part of an account number, part number, or other identifier as determined by a predefined formula Claim //............. a timing difference between an economic increment event and the related economic decrement event; receivables and payables are examples of claims Closed loop verification //............ an internal control that helps the user verify the correct record is being processed and updated by displaying details of the record the user should recognize as belonging to the record; e.g., display of a customer's name upon the user entering the customer number Collusion //........... two or more employees acting together to perpetrate a fraud Column //.......... the data values of an attribute (field) for various records (rows) in a database table Combined entity key posting //............. a logical level implementation compromise whereby a single foreign key is placed into a table to represent two or more different relationships Commitment event //........... an event whereby an enterprise becomes obligated to engage in a future economic event Committee on Sponsoring Organizations of the Treasury Commission (COSO) //.......... a committee of the Treadway Commission that issues reports with guidance/requirements as to components of internal control systems and methods of evaluating internal controls Comparison operator //........... in querying, operators used to compare a variable to a value; common comparison operators are less than, equal to, greater than, not equal to, greater than or equal to, and less than or equal to Completeness check //............. an edit check internal control that verifies that all critical field data are entered; only verifies that some value has been entered for each field; does not verify accuracy Composite attribute //.......... a characteristic that is a combination of other characteristics Concatenated primary key // ........... a unique and universal identifier for an entity or relationship that is made up of multiple attributes Conceptual database model //.......... a representation that depicts the important objects and relationships between the objects that must be captured in a database; is independent of any hardware, software, or even any type of software Conceptual level modeling compromise //............. the use of less than ideal representation in a conceptual model because of an inability (e.g., inadequate measurement technique) or lack of need to completely and accurately represent an object Conceptually congruent events // ............... two or more events that are inseparable, that always occur simultaneously Consume stockflow //.............. a relationship between a resource and an economic decrement event whereby the resource is partially used up by the decrement but still exists when the decrement is complete Context //.............. the circumstances or setting in which an event occurs; determines which script is invoked in attempting to understand and make predictions about the event Context diagram //.............. the highest level data flow diagram; represents a single system and provides the scope of the represented system Contingency plan //............... an approach to be followed in case of a future business interruption or other emergency Contract // an agreement that commits two or more enterprises to engage in one or more future exchanges of resources Control activity //................ one of COSO's five interrelated components of an internal control system; a policy or procedure used to ensure necessary actions are taken to minimize risks associated with achieving enterprise objectives; may be preventive, detective, or corrective in nature Control environment //................ one of COSO's five interrelated components of an internal control system; "the tone at the top"; the foundation that provides discipline and structure upon which all other components of internal control are built Conversion process //............... transaction cycle in which materials, labor, machinery, and other resources are transformed into finished goods or services; also called the manufacturing cycle Copy of entity //................. a duplicate representation of an entity placed in a separate position on a conceptual model; must be marked as a copy and have no attributes assigned to it to avoid the creation of duplicate database tables Corrective control //.............. a control activity that focuses on recovering from, repairing the damage from, or minimizing the cost of errors or irregularities Credit memorandum or credit memo //............ an internal document used to communicate to the accounting department that a journal entry needs to be made with a credit to the customer's account receivable; a copy may be given to the customer to confirm their account balance was decreased Creditor //............... an external agent (business partner) from whom the enterprise borrows cash and to whom the enterprise repays cash Customer //............. an external agent (business partner) to whom an enterprise sells its goods and services Customer order //.............. information in the customer's own format regarding what goods and services the customer is committing to purchase from an enterprise Customer statement //.............. a document that summarizes the economic transactions for a customer and reflects the customer's account balance status Database orientation // ........... a goal for integrated enterprise-wide data storage that requires data to (a) be stored at their most primitive levels, at least for a defined time period; ( be stored only once, and such that all authorized decision-makers can access the data; and © be stored so as to allow retrieval in various formats as needed for different purposes Database window (in Microsoft Access) // ............ a screen that depicts the components of the selected database (e.g., tables, queries, forms) Data flow diagram // ................ a graphical representation whose primary purpose is to illustrate the logical flow of data in a system Data flow diagram symbols //........... the notations used in a graphical representation whose primary purpose is to illustrate the logical flow of data in a system; four types of symbols are used: squares for data sources and destinations, circles for processes, arrows for data, and parallel lines for data storage Data manipulation language //............... the specification of operations to be performed on one or more data fields to obtain additional information; may create aggregations, horizontal calculations, subset selections, and so forth Datasheet view (in Microsoft Access) //............. a mode that presents a relational table or a query result in row/column format Data type (field property) (in Microsoft Access) //................ specification as to what kind of data values may be entered into a database table's column Data value //............. the actual entry in a cell of a database table Date constraint //............... a restriction placed on a date field in a query to limit the query results to include only records for which the date values meet the restriction Debit memorandum //.............. an internal document used to communicate the need for a journal entry to debit (decrease) the enterprise's accounts payable balance for a supplier to whom goods were returned Debt financing //............. a mechanism for acquiring cash whereby the enterprise borrows cash from one or more external business partners for a specified period of time and with the agreement that the enterprise will pay a specified interest rate as well as repay the principal balance Decomposition DFD //............. division of processes on a data flow diagram and into more detailed subprocesses Default value //............. a software option that sets a data field's contents to a prespecified (default) value; in some cases the default values may be overridden, while in other cases they may not Deposit slip //.............. a document used to summarize the cash receipts that are added to an enterprise's bank account at a specified point in time Derivable attribute //............... a characteristic of an entity or a relationship that can be calculated based on the values of other stored characteristics Design view (in Microsoft Access) //................ for relational tables, a mode that displays details about the fields of a table and allows the user to specify various design parameters such as which field(s) comprise the primary key, whether a field is set to required data entry, and the data type for a field; for queries, a mode that depicts the logic of a query in QBE format Detective control //............. a control activity that focuses on identifying that errors or irregularities have occurred Digital signature recognition //............ a technology that compares a user's signature to a stored digital representation of the user's signature to authenticate the identification of the user Direct deposit //................ a cash disbursement (economic decrement event) made to an employee via electronic funds transfer from the enterprise's bank account to the employee's bank account Disbursement voucher //............ an internal document that authorizes the transfer of cash from an enterprise to an external business partner Dividend //............. a portion of enterprise earnings that is paid to shareholders Dividend declaration commitment event //............. a commitment to a future economic decrement event in the equity financing cycle; a legal obligation of the enterpriseÑonce a dividend is declared the enterprise is required by law to actually pay the dividend Document/procedure flowchart //............. a graphical representation that depicts the movement of and processing procedures for documents through a system Duality relationship //............ the causal link between a give (economic decrement) event and a take (economic increment) event Dynaset (in Microsoft Access) //............ a query's result; looks and behaves like a table but is not actually stored as a table; it is generated as a view each time the query is run EbXML //............ Electronic Business using eXtensible Markup Language; a set of specifications that provides a standard method by which enterprises may communicate data in common terms Economic decrement event //........... an activity that decreases one or more resources Economic decrement reversal event //............ an activity that undoes a previous event that had decreased a resource; therefore, the reversal event increases the resource Economic event //................ an activity that either increases or decreases one or more resources Economic increment event //............. an activity that increases one or more resources Economic increment reversal event //.......... an activity that undoes a previous event that had increased a resource; therefore, the reversal event decreases the resource Economy risks //............ threats of loss associated with factors that affect the entire economy, and control activities that mitigate such threats Edit check //.............. a control incorporated into computer program instructions to verify and validate the completeness, reasonableness, and/or accuracy of data Electronic commerce (e-commerce) //............... use of electronic technology to facilitate or accomplish business exchanges Electronic data interchange (EDI) //............ the exchange of transaction-level data between enterprises in a prescribed electronic format, usually through a proprietary value-added network Electronic funds transfer //............ a form of payment that reduces human involvement with cash by having customers electronically transfer funds from their personal bank accounts directly to the company's bank account Employee //............. an external business partner with whom the enterprise exchanges cash for labor; also serves as an internal agent acting on the enterprise's behalf Employee knowledge and skills //.............. resources an enterprise is obtaining together with employee labor, but which the enterprise usually is unable to "own" Encryption //......... a process of encoding data entered into a system, storing or transmitting the data in coded form, and then decoding the data upon its use or arrival at its destination to prevent unauthorized access to the data while it is stored or as it is transmitted Enforce referential integrity (in Microsoft Access) // ........... a choice selected in the relationship layout to determine whether the referential integrity principle will be enforced in a relationship between two tables as the user enters data into the database Enterprise //............. an organization established to achieve a particular undertaking involving industrious, systematic activity; may be profit driven or charitably motivated Enterprise application integration software (EAI) //............. a software solution that builds bridges from existing applications to a generic central hub that integrates the pieces Enterprise resource planning system (ERP) //........... a group of software applications integrated to form an enterprise-wide information system solution Enterprise risks and controls //........... threats of loss to the enterprise as a result of internal and external factors that result from the actions or circumstances of the enterprise itself or of one of its external business partners, and control activities to mitigate such threats Entity //............ an object that has either a physical or conceptual existence Entity conflict //............. discrepancies in the labeling of entity sets in different views; may result from synonyms (same entity set given two different labels) or homonyms (different entity sets given the same label) Entity integrity //........... a principle in the relational database model that requires the primary key of each tuple (row) to contain a non-null value; guarantees the uniqueness of entity instances and enables proper referencing of primary key values by foreign key values Equi-join //.......... a join that combines the tables together based on a common attribute, keeping only those rows for which the data values of the common attribute match exactly; also called an inner join; accomplishes a set intersection of the tables Equipment //............. a resource that gets partially consumed in machine operations in the conversion process Equity financing //........... a mechanism for acquiring cash whereby the enterprise issues shares of stock in exchange for cash ERP system software // .............. Internally developed or packaged software (such as SAP, PeopleSoft/JD Edwards, or Oracle Applications) that aims to provide one integrated enterprise-wide system with a common database Error //.............. an unintended mistake on the part of an employee or external business partner Event // an activity within an enterprise that needs to be planned, controlled, executed, and evaluated Event activity roll-up //............... the aggregation of a group of event records into a single summary entry; an implementation compromise made at the physical level after transaction data is entered into the database once the historical detail is no longer needed Exchange //............ a trade or swap of resources between two parties Exposure //............ the potential impact of a threat of loss on an enterprise, i.e., uncontrolled risk Expression builder (in Microsoft Access) //........... an application within Microsoft Access that assists the user in creating horizontal calculations within queries Extended business process level REA model //............ the business process level of the REA enterprise ontology that includes commitment events, instigation events, and appropriate relationships in which those types of events participate Extension //............... the rows in a relational database table; they represent the specific instances that are members of the entity or relationship set External agent //........... a person or organization with which an enterprise trades resources; also called external business partner External business partner //............ a person or organization with which an enterprise trades resources; also called external agent Fact //........... the pairing of a candidate key data value with another attribute data value; facts are found in a table's extension (rows) Field //.............. a column in a relational database table Field or mode check //.............. an instruction in a computer program that verifies the entered data type is the appropriate mode (e.g., text, numeric, date) for the field into which the data is entered Field property (in Microsoft Access) //............. defines the type of data that is allowed to be entered into a column of a database table Financial officer //.............. internal agent who authorizes events in the financing process Financing process //............. transaction cycle in which cash is exchanged for cash at a later point in time; may include debt and/or equity financing Finished goods //................ the resource(s) produced in a production run event in the conversion process; the type of inventory into which raw materials, labor, and equipment are transformed Firm infrastructure //............. support value activities in Porter's generic value chain; activities that support the entire value chain (e.g., general management, planning, finance, accounting, legal, government affairs, quality management) Flowcharting conventions //............ guidelines to be followed in preparing a system flowchart Flowcharting symbols //............... specific notations used to communicate constructs on a system flowchart; numerous symbols are used to represent different constructs Flow line //.............. a symbol on a flowchart used to indicate the movement of a document, a physical object, or data to the next point in a system Foreign key //............... an attribute from one relational database table that is added as a column in another relational database table to establish a link between the two tables Fraud an intentional effort to cause harm to an enterprise; an irregularity Front-office systems //.............. systems and activities that are typically visible to external partners such as customers and vendors Fulfillment relationship //.............. associations between instigation and commitment events whereby the commitment events fulfill the instigation events, and associations between commitment events and economic events whereby the economic events fulfill the commitment events General controls //............. all controls over data center operations, access security, systems software acquisition and maintenance, and application system development and maintenance Generalization //............. a relationship between a supertype and its subtype entities; often called an "is-a" relationship Grandparent-parent-child approach //............... a backup and file reconstruction procedure generally used with batch processing that maintains at least three generations of both event/maintenance data and master reference data; if the current version (the "child" copy) of the master reference file is destroyed or lost, the enterprise can reconstruct it by rerunning the appropriate event/maintenance data against the prior copy of the reference data (the "parent" copy); if a problem occurs during that reconstruction run, the backup data "grandparent" copy may be used to reconstruct the parent file; the parent is then used to reconstruct the child, and processing continues normally Group by //.......... a querying function used to create subgroups to which aggregations may be applied; a means for creating subtotals Homonym //............. a word used to designate multiple different things Horizontal calculation //............... a row computation in a query that combines data from two or more separate columns of one or more tables Horizontal subset of a table //............. a part of a table that includes only some of the table's rows, but includes all the columns Human resource management //.............. support value activities in Porter's generic value chain; activities involved in recruiting, hiring, training, developing, and compensating all types of personnel Human resources process //............. transaction cycle in which cash is exchanged with employees for labor; also called the payroll cycle Implementation compromise //........... deviation from the identified ideal information system design due to practical considerations, insufficient measurement techniques, and other constraints Imprest cash account //.............. a checking account that normally maintains a zero balance and is often used for payroll; enterprise transfers total payroll amount from a regular checking account to an imprest account; individual paychecks are drawn on the imprest account; a positive balance indicates employees haven't cashed paychecks; a negative balance indicates a mistake likely occurred; either situation warrants investigation Inbound logistics // ............ primary value activities in Porter's generic value chain; activities associated with receiving, storing, and disseminating inputs to the products or services Independent checks on performance //............... verification of accuracy of an employee's performance by a different employee (or by an automated procedure) Industry risks //............ threats of loss associated with factors that affect an enterprise's industry, and control activities that mitigate such threats Inflow //............ the flowing in (receipt) of a resource to an enterprise Information and communication //.............. one of COSO's five interrelated components of an internal control system; prescribes features of the information system to ensure information quality and also prescribes open channels of communication to ensure employees understand what is expected of them in achieving internal control objectives Information event //.......... a workflow activity that records, maintains, or reports information about one or more operating events Information need //.......... a situation for which data is required, e.g., as input to a decision Information process risks //............. Risks associated with recording, maintaining, and reporting information about resources, events, and agents and controls to mitigate those risks Information retrieval //........... repossession or capture of data that was previously entered into a database or other data storage structure Information system //............. the network of all communication channels used within an organization, including all paths by which enterprise employees and business partners impart and receive information (e.g., telephone conversations, written documents, fax transmittals, computer technology) Inner join //............ a join that combines the tables together based on a common attribute, keeping only those rows for which the data values of the common attribute match exactly; also called an equi-join; accomplishes a set intersection of the tables Instigation event //............ an activity in which need for a resource is identified; typically the event that starts a transaction cycle Integration // .............. the combination of parts into a whole Intension //............. the columns in a relational database table; they represent the attributes of the entity or relationship set; also called the schema of the table Inter-enterprise integration //............... the connection of separate systems across two or more enterprises Internal agent //.............. an individual, department, or division within an enterprise that participates in the control and/or execution of one or more events Internal business process //............... a series of activities that achieve a business objective within an enterprise; a transaction cycle within an enterprise Internal control //................. an activity performed to minimize or eliminate risk Intra-enterprise integration //............ the connection of separate systems within an enterprise Inventory //............ a resource; goods purchased or manufactured by an enterprise and offered for sale to customers Inventory type //............. a resource type; a category of goods purchased or manufactured by an enterprise and offered for sale to customers Investor //............ an external agent with whom the enterprise exchanges partial ownership of the enterprise for cash Irregularity //.............. an intentional effort to cause harm to an enterprise; a fraud Job time ticket //.............. a document that indicates starting and stopping times and descriptions for labor operations performed on a specific date by a specific employee; the document's number often serves as an identifier for the labor operation event; also called a time track document Join // to combine separate but related tables by linking them on their common attributes; one of the three primary relational algebra operators discussed in this book Join properties window (in Microsoft Access) a screen that appears when a user double-clicks on a join line to reveal whether the join is an inner join, a left join, or a right join; a user can change the join type in this window Key verification (rekeying) //.......... the keying of input data twice, with the computer comparing the two entries and highlighting any discrepancies for correction .

International Financial Reporting Standards (IFRS) are coming, and coming soon. The SEC has approved a rule change that allows foreign private securities issuers to use IFRS, without reconciliation to U.S. GAAP effective in 2008. In June of 2007, the Commission issued a concept release suggesting that U.S. firms may soon be permitted or required to file using IFRS. Accounting educators must get up to speed very, very quickly on IFRS so that our students learn the new standards. Students taking their first accounting course in Fall 2008 will graduate into an "IFRS world," unlike the "GAAP country," their faculty studied

Good morning I'm a training (student) in institute and I studying in account section. In of my module I have assignment. If you a student like me how do you answered these questions. I would like from you to answered theses questions….Please if you can. What job would you like to have five years from now?If that job is not available, what are two other comparable jobs would you like to have in five years?Bearing in mind the job you would most prefer to have in five years, what are the three intermediate-level jobs should pursuer?Why did you choose the field of study you did?Why do you think work is important for you?What are your skills, experiences?What work related activities do you enjoy most?What work related activities do you enjoy least?List five job related skills and abilities. Is there any gap between your qualifications and the qualifications required for these jobs?How to improve your strength and take corrective actions for your weaknesses.

مرحبا هذي اول مشاركه بسيطه مني اتكلم فيها عن المحاسبه الادرايه بشكل سريع وتعتبر مقدمه لسلسه من الملخصات الي راح اشارك فيها كل مره واتمنى الكل يستفيد: The Changing Role of Managerial Accounting in a Dynamic Business Environment HOW MANAGERIAL ACCOUNTING ADDS VALUE? · Provides managers with information (e.g., the cost of products, budgets, cash flows). The information includes financial and nonfinancial data to help managers with strategic planning and decision making. · Assists in directing and controlling (analyzing and comparing actual performance to budgeted plans; attention-directing to highlight successful or problem areas). · Motivates managers to achieve the organization’s goals by communicating the plans, providing a measurement of how well the plan was achieved, and prompting an explanation of deviations from plans. Ø Motivation is achieved, in part, through employee empowerment—the concept ofencouraging and authorizing workers to improve operations, reduce costs, and improve product quality and customer service. · Measures performance not only for the entire organization, as in financial accounting, but also for many subunits (divisions, departments, managers). · Assesses the organization’s competitive position in the rapidly changing business environment. Looks at how well the firm is doing internally, in the eyes of its customers, from the standpoint of innovation and continuous improvement, and financially. Ø The preceding factors are integrated in a model of performance evaluation known as the balanced scorecard. MAJOR THEMES OF MANAGERIAL ACCOUNTING · Managerial accountants often facilitate and influence decisions by providing information, rather than make final decisions for managers. · To function effectively, accountants must have some understanding of human behavior. People often react to the way accounting information is gathered and reported (e.g., employees who provide input into the budget process often work harder to meet that budget). · There are costs and benefits associated with management accounting information. Managers must determine whether a new technique or report will yield benefits greater than the cost of obtaining the information. STRATEGIC COST MANAGEMENT & THE VALUE CHAIN · More attention is being paid to the value chain—the set of linked, value-creating activities, from conducting product research, to manufacturing, to providing customer service. ü A number of activities occur prior to the production of a good or service (i.e., upstream activities) and several occur after (so-called downstream activities). · Managers must understand the cost-causing factors (cost drivers) in an organization’s value chain. · Managing the cost relationships within a value chain to the firm’s advantage is called strategic cost management. EVOLUTION OF MANAGERIAL ACCOUNTING · Growth of e-business (including supply-chain management and e-budgeting). · Growth of the service sector. · Emergence of new industries, such as superconductivity and genetic engineering. · Global environment and increasing international competition. · An increased focus on the customer. · The growing popularity of cross-functional teams. · Computer-integrated manufacturing (CIM) that moves production from a labor-intensive process to an automated process. The accounting system must evolve to provide measurements in a new environment. · Product life cycles that are becoming shorter to keep up with changing technol­ogy and more diverse product lines. · Time-based competition, which is assuming a greater role in business, with customer-response time and time-to-market being critical factors for the truly competitive enterprise. · Information and communication technology (the Internet, intranets, cellular technology) that increase the key facts supplied to executives so they can better manage their businesses. · Programs of continuous improvement that strive to eliminate waste, reduce response time, simplify design, and improve quality and customer service. CONTINUOUS IMPROVEMENT · Continuous improvement is often necessary just to remain competitive. · A number of management approaches to continuous improvement are widely used, including: •Just-In-Time (JIT) • Total Quality Management (TQM) • Process Reengineering • Theory of Constraints (TOC) • Balanced Scorecards (BSC). These basic approaches to continuous improvement have different emphases, but can be used to complement and reinforce each other. JUST-IN-TIME (JIT) · Just-In-Time (JIT) means that raw materials are received just in time to go into production, parts arrive at workstations just in time to be assembled into products, and products are completed just in time to be shipped to customers. In a true JIT system, inventories are almost entirely eliminated. · In JIT, parts and material are pulled through the assembly process as needed. · At the final assembly stage, a signal is sent to the preceding workstation as to the exact amount of parts and materials needed over the next few hours for the final assembly of products. · A similar signal is sent back through each preceding workstation. Thus, all workstations respond to the pull exerted by the final assembly stage. · The pull approach is in contrast to the push approach used in conventional production control systems. In a push system, work in process is pushed through the factory from one workstation to the next with little regard to when it is actually needed. In a push system, the overriding concern is often to keep all the workstations busy. KEY ELEMENTS IN A JIT SYSTEM · Initiate JIT purchasing. Suppliers must deliver defect-free goods in just the right quantity and just when needed. · Improve the plant layout to reduce the distances work in process must travel. Traditionally, all drill presses are put in one location, all milling machines in another, and so on. Instead, under JIT all of the different machines required to make a major component are often grouped together in a “manufacturing cell.” · Reduce setup time. This permits a reduction in batch sizes, increases the speed with which a company can respond to customer orders, and reduces the need for inventories. · Strive for zero defects. When defect rates are high, excess work in process is needed to ensure that enough defect-free goods are completed to meet customer orders. · Develop a flexible work force. Manufacturing cells contain many different machines that each individual should know how to run. BENEFITS OF A JIT SYSTEM The following are often cited as major benefits of a JIT system: 1. Funds that had been tied up in inventories can be used elsewhere. 2. Space is made available for more productive uses. 3. Throughput time is reduced, resulting in better responsiveness to customers. 4. Defect rates are reduced. TOTAL QUALITY MANAGEMENT (TQM) • TQM emphasizes an unending series of small, incremental improvements. • TQM is implemented by teams of front-line workers who identify and solve problems. PROCESS REENGINEERING • Process reengineering is a more radical approach to improvement than TQM. • In Process Reengineering, business processes are completely redesigned to eliminate non-value-added activities, reduce errors, and reduce costs. • Unlike TQM, Process Reengineering is often imposed from above and often involves outside consultants and specialists. • Managers must take care that Process Reengineering does not have a negative impact on employee morale. • Changes imposed from above and by outsiders are often resented and resisted. • Process Reengineering, by simplifying work and eliminating unnecessary steps, may tempt managers to lay off workers. THEORY OF CONSTRAINTS (TOC) • A constraint is anything that limits the ability of an individual or organization to attain its objectives. • If the factory cannot satisfy demand, the constraint is in the factory. The constraint (i.e., bottleneck) is likely to be the workstation that has the lowest rate of output and smallest capacity. • The rate of output of the entire factory is determined by the rate of output of the constraint. • The other, non-constraint, work stations have excess capacity. • Improvement efforts should usually be focused on the constraint. • Improvements that increase the rate of output and capacity of the constraint will increase the output of the entire factory. • Improvements that increase the rate of output and capacity of workstations that are not constraints will simply increase their excess capacity. • If the current bottleneck is improved enough, the constraint will shift. Improvement efforts should then be shifted to the new constraint (bottleneck). The Balanced Scorecard Management translates its strategy into performance measures that employees understand and accept. Performance measures Customers Learning and growth Internal business processes How do we look to the owners? How can we continually learn, grow, and improve? In which internal business processes must we excel? How do we look to customers? STANDARDS OF ETHICAL CONDUCT FOR MANAGEMENT ACCOUNTANTS (adapted from IMA) COMPETENCE • Maintain professional competence. • Follow laws, regulations, and standards. • Prepare complete and clear reports and recommendations after appropriate analysis. CONFIDENTIALITY • Don’t disclose confidential information. • Ensure that subordinates do not disclose confidential information. • Do not use confidential information for personal gain or advantage. INTEGRITY • Avoid actual or apparent conflicts of interest. • Refuse gifts, favors, or hospitality that might influence objectivity. • Refrain from subverting the organization’s legitimate objectives. • Recognize and communicate personal limitations. • Communicate unfavorable as well as favorable information and opinions. • Refrain from actions that discredit the profession. OBJECTIVITY • Communicate information fairly and objectively. • Fully disclose all information that could be expected to influence a user’s understanding.

Learning objectives On completion of this chapter you will be able to: · explain and appraise the meaning of an income statement which identifies Discontinued operations, prior period adjustments and non-current assets held For resale • explain how adjustments are made for changes in accounting policy and prior period errors • disclose assets 'held for sale' · present information regarding discontinued operations • identify how companies provide a segmental analysis of their results · explain the purpose of segmental information and appraise its usefulness 1 lAS 8: Accounting policies, changes in accounting Estimates and errors Changes in accounting policy and prior period errors should be dealt with retrospectively . Changes in accounting estimates should be dealt with prospectively. 1.1 Accounting policies Accounting policies are the specific principles. bases conventions. rules and practices adopted by an entity in preparing and presenting financial statements Accounting pclicier determined pv applying the relevant IFRS or IFRIC and considering any relevant implementation Guidance issued bythe IASB forthat lFFlS’lFRlC. Vi/here there is no appucahle IFRS or lFl;ilC management should use its judgement in developing and applying an accounting policy that results in information that is relevant and reliable. Management should refer to. (al The requirements and guidance in lFRSs and lFRlCs dealing with similar and related issues ‘ lb) The definitions, recognition criteria and measurement concepts for assets, liabilities and expenses in the Framework Management may also consider the most recent pronouncements of other standard setting bodies that use ¤ s ·**lar conceptual framework to develop standards. other accounting literature and accepted industry practices if these do not conflict with the sources above. An entity must select and apply its accounting policies for a period consistently for similar transactions, other events and conditions, unless an lFFtS or an lFltlC specifically requires or permits categorisation of items for which ditlereot policies may he appropriate ll an lFFiS or an lFRlC requires or permits categorisation ol items, an appropriate accounting policy must be selected and applied consistently to each category. 1.2 Changes in accounting policies The same accounting policies are usually adopted from period to period, to allow users to analyse trends over time in profit, cash flows and financial position. Changes in accounting policy will therefore be rare and should be made only if required by one of three things. (a) By statute ( By an accounting standard setting body © if the change will result in a more appropriate presentation of events or transactions in the financial statements of the entity The standard highlights two types of event which do not constitute changes in accounting policy. (a) Adopting an accounting policy for a new type of transaction or event not dealt with previously by the entity. ( Adopting a new accounting policy for a transaction or event which has not occurred in the past or which was not material. in the case of tangible non-current assets, if a policy of revaluation is adopted for the first time then this is treated, not as a change of accounting policy under IAS 8, but as a revaluation under IAS 16 Property, plant and equipment (see Chapter 8). The following paragraphs do not therefore apply to a change in policy to adopt revaluations. IAS 8 requires retrospective application, unless it is impracticable to determine the cumulative amount of charge. Any resulting adjustment should be reported as an adjustment to the opening balance of retained earnings. Comparative information should be restated unless it is impracticable to do so. This means that all comparative information must be restated as if the new policy had always been in force, with amounts relating to earlier periods reflected in an adjustment to opening reserves of the earliest period presented. Prospective application is allowed only when it is impracticable to determine the cumulative effect of the change. Certain disclosures are required when a change in accounting policy has a material effect on the current period or any prior period presented, or when it may have a material effect in subsequent periods. (a) Reasons for the change ( Amount of the adjustment for the current period and for each period presented © Amount of the adjustment relating to periods prior to those included in the comparative information (d) The fact that comparative information has been restated or that it is lmpracticable to do so An entity should also disclose information relevant to assessing the impact of new IFRS on the financial statements where these have not yet come into force. 1.3 Changes in accounting estimates Estimates arise in relation to business activities because of the uncertainties inhcrent within them. Judgements are made based on the most up to date information and the use of such estimates is a necessary part of the preparation of financial statements. it does not undermine their reliability. Here are some examples of accounting estimates. (a) A necessary bad debt allowance ( Useful lives of depreciable assets © Allowance for obsolescence of inventory The rule here is that the effect of a change in an accounting estimate should be included in the determination of net profit or loss in one of: (a) The period of the change, if the change affects that period only ( The period of the change and future periods, if the change affects both Changes may occur in the circumstances which were in force at the time the estimate was calculated or perhaps additional information or subsequent developments have come to light. An example of a change in accounting estimate which affects only the current period is the bad debt estimate. However, a revision in the life over which an asset is depreciated would affect both the current and future periods, in the amount of the depreciation expense. Reasonably enough, the effect of a change in an accounting estimate should be included in the same income statement classification as was used previously for the estimate. This rule helps to ensure consistency between the financial statements of different periods. The materiality of the change is also relevant. The nature and amount of a change in an accounting estimate that has a material effect in the current period (or which is expected to have a material effect in subsequent periods) should be disclosed. If it is not possible to quantify the amount, this impracticability should be disclosed. 1.4 Errors Errors discovered during a current period which relate to a prior period may arise through: (a) Mathematical mistakes ( Mistakes in the application of accounting policies © Misinterpretation of facts (d) Oversights (e) Fraud most of the time these errors can be corrected through net profit or loss for the current period. Where they are material prior period errors. however, this is not appropriate. The standard considers two possible treatments. Prior period errors: correct retrospectively. This involves: (a) Either restatrng the comparative amounts for the prior period(s) in which the error occurred. ( Or, when the error occurred before the earliest prior period presented. restating the opening balances of assets abilities and equity for that period so that the financial statements are presented as if the error had never occurred. Only where it is impracticable to determine the cumulative effect of an error on prior periods can an entity correct an error prospectively. Various disclosures are required. providing information about the nature of the error and its effect on the financial results. 2 IFRS 5: Non-current assets held for sale and discontinued operations IFRS 5 requires assets 'held for sale` to be presented separately on the face of the balance sheet. 2.1 Background IFRS 5 is the result of a short-term convergence project with the US Financial Accounting Standards Board (FASB). IFRS 5 requires assets and groups of assets that are ‘held for sale’ to be presented separately on the face of the balance sheet and the results of discontinued operations to be presented separately in the income statement. This is required so that users of financial statements will be better able to make projections about the financial position, profits and cash flows of the entity. IFRS 5 does not apply to certain assets covered by other accounting standards including: • Deferred tax assets (IAS 12) • Investment properties accounted for in accordance with the fair value model (IAS 40) 2.2 Classification of assets held for sale A non-current asset (or disposal group) should be classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. A number of detailed criteria must be met: (a) The asset must be available for immediate sale in its present condition. ( Its sale must be highly probable (ie , significantly more likely than not). Disposal group: a group of assets to be disposed of. By sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction. I (in practice a disposal group could be a subsidiary. a cash-generating unit or a single operation within an entity.) For the sale to be highly probable, the following must apply. (a) Management must be committed to a plan to sell the asset ( There must be an active programme to locate a buyer. © The asset must be marketed for sale at a price that is reasonable in relation to its current fair value. · (d) The sale should be expected to take place within one year from the date of classification. (e) It is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. An asset (or disposal group) can still be classified as held for sale, even if the sale has not actually taken place within one year. However, the delay must have been caused by events or circumstances beyond the entity's control and there must be sufficient evidence that the entity is still committed to sell the asset or disposal group. Otherwise the entity must cease to classify the asset as held for sale lf an entity acquires a disposal group (eg . a subsidiary) exclusively with a view to its subsequent disposal it can classify the asset as held for sale only if the sale is expected to take place within one year and it is highly probable that all the other criteria will be met within a short time (normally three months). An asset that is to be abandoned should not be classified as held for sale. This is because its carrying amount will be recovered principally through continuing use. However, a disposal group to be abandoned may meet the definition of a discontinued operation and therefore separate disclosure may be required (see below) On l December 20x3. a company became committed to a plan to sell a manufacturing facility and has already found a cotential buyer. The company does not intend to discontinue the operations currently carried out in the facility. At 31 December 20X3 there is a backlog of uncompleted customer orders.The company will not be able to transfer the facility to the buyer until after it ceases to operate the facility and has eliminated the backlog of uncompleted customer orders. This is not expected to occur until spring.20X4. Required Can the manufacturing facility be classified as 'held for sale‘ at 31 December 2OX3? 2.3 Measurement of assets held for sale · Fair value: the amount for which an asset could be exchanged, or a liability settled, between knowleggeable,willing parties in an arm’s length transaction. • Costs to sell: the incremental costs directly attributable to the disposal of an asset (or disposal group). excluding finance costs and income tax expense. • Recoverable amount: the higher of an asset’s fair value less costs to sell and its value in use. • Value in use: the present value of estimated future cash flows expected to arise from the Continuing use of an asset and from its disposal at the end of its useful life. A non-current asset (or disposal group) that is held for sale should be measured at the lower of its carrying amount and fair value less costs to sell. Fair value less costs to sell is equivalent to net realisable value. An impairment loss should be recognised where fair value less costs to sell is lower than carrying amount. (see Chaptar8) Non-current assets held for sale should not be depreciated, even if they are still being used by the entity A non-current assets (or disposal group) that is no longer classified as held for sale (for example, because the sale has not taken place within a one year) is measured at the lower of: (a) its carrying amount before it was classified as held for sale, adjusted for any depreciation that would have been charged had the asset not been held for sale ( its recoverable amount at the date of the decision not to sell 2.4 Presentation of a non-current asset or disposal group classified as held for sale Non-current assets and disposal groups classified as held for sale should be presented separately from other assets in the balance sheet The liabilities of a disposal group should be presented separately from other liabilities in IME balance sheet.

مساهمة في الموضوع المطروح مني اليوم ابدأ ب multiple currencu accounting Prof. Timo Salm0i A Comparative Review of the Finnish Expenditure-Revenue Accounting Based on a Working Paper 78-2. European Institute for Advanced Studies in Management, Brussels, January 1978. Rewritten for electronic publication in 1993. Technically revised in 1996. ISBN 951-683-724-7. Copyright © 1978 and 1996 by Timo Salmi. CONTENTS  Abstract 1. Purpose 2. Accounting for the Entire Life-Span of the Firm 21. Fundamental Concepts 211. Adoption of the Total Period 212. Expenditures, Revenues, and Financing 213. Determination of Total Profit 214. Entity, Money Measurement and Cost Conventions 215. Summary 22. The Accounting Process 221. Expenditure, Revenue, and Financing Accounts 222. Cash Basis 223. Accrual Basis 3. Accounting for Segments of the Total Period 21. Segmenting a Total Period 311. Reason for Segmenting 312. The Congruence Principle 313. Discussion on the Causal Relation between Annual and Total Profits 22. Principles of Annual Income Determination 321. Annual Closing of Accounts 322. Expenses and Unexpired Expenditures 323. The Matching Convention 23. Special Topics 331. Priority Order of Matching 332. Realization Depreciation 24. Treatment of Expenditure, Revenue, and Financial Accounts in Closing 4. Recapitulation  Footnotes and References Please use the following reference to this publication: Salmi, T. (1993), "A Comparative Review of the Finnish Expenditure-Revenue Accounting [online]", available from World Wide Web: <URL:http://www.uwasa.fi/~ts/comp/comp.html>. ISBN 951-683-724-7. Timo Salmi Professor of Accounting and Finance A Comparative Review of the Finnish Expenditure-Revenue Accounting ABSTRACT: In Finland the accounting theory put forward by Professor Martti Saario (in 1958, 1959, and partly 1945) is dominant in accounting legislation, teaching and research. This paper reviews the theory, states the unstated economic assumptions on which the theory must be based, and compares the accounting conventions inherent in the application of this theory with the conventions in the generally accepted accounting principles (GAAP). At the same time it is the purpose to subject this theory to an international forum, since this has not been done so far. KEY WORDS: Accounting theory; Accounting principles; Financial accounting; Accounting model; Finland Timo Salmi (1993), "A Comparative Review of the Finnish Expenditure-Revenue Accounting", published on the World Wide Web as http://www.uwasa.fi/~ts/comp/comp.html at the University of Vaasa, Finland. 1. Purpose Accounting has, aptly, often been called the language of business. General accounting concepts are used in communication between researchers in the accounting field in different countries. The accounting rules, conventions and practices as well as accounting legislation vary, however, in some degree from country to country. The concepts used in teaching financial accounting to business students may also differ in a fundamental manner. The purpose of this paper in the area of comparative accounting is to facilitate communication about Finnish accounting research and the concepts used in teaching financial accounting in Finland. This is done by reviewing the "expenditure-revenue-accounting" model applied in Finland. This accounting model is of general interest because it is an example of taking an unconventional approach to the going concern convention, and developing the accounting model starting from the income statement concepts rather than the internationally more common expansion from the balance sheet concepts. The expenditure-revenue accounting model as propounded in the Finnish language is attributed solely to late professor Martti Saario _1/. This accounting theory has been the dominant basis of financial accounting legislation and teaching in Finland. The the financial accounting practices based on the expenditure-revenue accounting theory resemble in many respects the accounting practices based on the American Generally accepted accounting principles, the GAAP. It will be assumed throughout this paper that the reader is reasonably familiar with the GAAP. This paper is a review of Professor Saario's accounting theory. The presentation is based on my own interpretation of expenditure-revenue accounting and GAAP. An attempt is made not to express any personal preferences concerning the choice of the accounting concepts. The evaluation of the potential merits or dismerits of Professor Saario's expenditure-revenue accounting as a background for financial accounting practices and teaching, as compared with accounting practices based on GAAP, will be the reader's. 2. Accounting for the Entire Life-Span of the Firm 21. Fundamental Concepts 211. Adoption of the Total Period Income determination is taken as the underlying purpose of expenditure-revenue accounting. This basic premise should continuously be borne in mind throughout this paper. The fundamental difference between the Finnish expenditure-revenue accounting and GAAP is discarding the going-concern convention in the former. _2/ Instead, the total period from the firm's foundation to its liquidation will first have to taken under observation in order to define the total profit for the entire life-span of the firm. 212. Expenditures, Revenues, and Financing In expenditure-revenue accounting the fundamental objective of the entrepreneur is taken to be earning a profit, because it provides the desired purchasing power. The objective of the business firm is assumed to be the same. In order to earn a profit the firm must commit expenditures as a prerequisite of revenues. Thus, in principle, there is a fundamental association between expenditures _3/ and revenues _4/. For the entire life-span of the firm the sum of the receipts exceeds the sum of the disbursements if the revenues for the total period exceed the expenditures, provided that distributions of profits have not exceeded the profit for the total period. Expenditures, however, precede corresponding revenues. It is this discrepancy in timing that gives rise to the need of outside financing. Two mutually exclusive, comprehensive sources of outside financing are defined. The first is paid-in capital from the owners. The second is debt. The life-span of the firm, i.e. the total period thus entails: 1. Acquiring outside financing a. paid-in capital from owners b. debt 2. Expenditures 3. Revenues 4. Repaying outside financing a. debt b. paid-in capital to owners Furthermore, the financial flows through the firm, as will be illustrated by Figure 1, include the distribution of profits among creditors, government, and owners; in other words interest, taxes, and dividends. 213. Determination of Total Profit The expenditure-revenue accounting approach was developed taking the total period under observation. When the going-concern convention is thus discarded and the total period from the firm's foundation to its liquidation is under observation, the matching problem automatically becomes solved and income determination trivial, in principle. For the total period all expenditures have to expire and become expenses, because no more revenues to match against exist, per definition, after the firm has been dissolved. Hence, the TOTAL income _5/ is the difference between the TOTAL revenues and TOTAL expenditures. The aim of expenditure-revenue accounting is solely the determination of income. The evaluation and further usage of the observed income is strictly separated from income determination, and is limited outside expenditure-revenue accounting. 214. Entity, Money Measurement and Cost Conventions Finnish accounting text-books introducing expenditure-revenue accounting usually elucidate financial accounting with the help of some version of Figure 1. Figure 1. The Financial and Material Flows through the Firm CAPITAL MARKET paid-in and debt capital : distribution : of profits : repayment -interest : : -taxes : : -dividends : +------+ (expen- ) : : (ditures) : : (revenues) payments +--------------+--+---------------+ payments for inputs ! : : ! from outputs {----------+- accounts {- cash {- accounts {-+-------------- ! payable receivable ! financial process ................................................................... ! production flow ! physical process ---------} ! ------------------------------} ! -----------------} physical ! ! physical output input flow +---------------------------------+ flow INPUT MARKET OUTPUT MARKET In accordance with the entity convention the firm in Figure 1 is the relevant entity. It acquires a set of "physical" inputs, transforms the inputs into outputs in the production process and sells the resultant outputs. This physical process is reflected in the financial process as depicted by Figure 1. Financial accounting (in our case expenditure-revenue accounting) is defined as a description of the financial process of the business entity under observation. Figure 1 emphasizes the central conceptual role assumed for cash in expenditure-revenue accounting. _6/ Money measurement convention is used in registering the flows of the financial process. This is natural because, per definition, monetary flows are under observation. The measurement of the flows of the financial process is made according to the (historical) cost convention (c.f. "stable dollar" assumption). Thus, in comparison with accounting based on the GAAP, no changes are made in entity, money measurement, or cost conventions in accounting based on the expenditure-revenue accounting model. 215. Summary To recapitulate, I denote r(i) = the i:th revenue observed from the financial process d(j) = the j:th expenditure observed from the financial process P = total income I = the total set of revenue indices J = the total set of expenditure indices then (1) P = sum r(i) - sum d(j) . icI jcJ 22. The Accounting Process 221. Expenditure, Revenue, and Financing Accounts Three sets of accounts are defined for recording purposes in expenditure-revenue accounting. They are 1. Financing accounts 2. Expenditure accounts (not "expense" accounts) 3. Revenue accounts All transactions arising in financial accounting for the firm can be recorded on accounts belonging to the above three categories. The following subcategorization of financing accounts can be used. • cash • receivables and payables • capital o debt capital o owners' capital o distribution of profits 222. Cash Basis For instructive reasons first consider the recording of transactions on cash basis. _7/ Figure 2 depicts the recording of the basic transactions on T-accounts. Figure 2. Recording Transactions . . . . . . . . . . . . . . . . Sources of cash . Sinks of cash . . . +-------------.--------------+ . : Financing . accounts : . : . : . Revenue : Capital . C a s h : Expenditure . accounts : accounts . + - : accounts . ========= : ========= . --------- : =========== 1a . ! : ! -----+----} ! : ! b . ! : ! -----+----} ! : ! 2 . ! : ! . ! ---------------} ! 3 . ! ------------+------+----} ! : ! 4a . ! : {-+------+------+-- : ! b . ! : {-+------+------+-- : ! . : ! +-------------.--------------+ ! : . : . : . . .:. . . . . . . . . . . . : : : : Total income : : ------------ : +------------------------!--} : {--!-------------------------+ ! As is seen in Figure 2, the total income is the difference of the balances of the (total) revenue accounts and expenditure accounts. All the rules needed for recording various transactions can be deduced from the following convention of expenditure-revenue accounting, which corresponds to the dual aspect convention of the GAAP. Every transaction is recorded as a debit and equal credit. An increase in cash is recorded as a debit on cash account. For example, it can be deduced with the help of Figure 2 that a revenue is credited on the relevant revenue account, whereas an expenditure is debited (charged) on the relevant expenditure account. The details of recording different transactions in accordance with the expenditure-revenue accounting model have naturally been described in great detail in Finnish accounting text-books. The position of the cash account in Figure 2 (and later in Figure 3) reflects the central conceptual role of cash. In expenditure-revenue accounting cash is used as the reference account instead of owners' equity, which is the reference account for accounting based on GAAP. It must be stressed, however, that this does not imply a suggestion for cash-flow accounting. The rules for recording transactions do not differ from GAAP rules, since the equation "assets = liabilities + owners' equity" can be derived as a corollary of the "debit equals credit, and increase in cash is a debit"- convention. Figure 2 shows that for closing purposes an additional account is needed outside the financing / expenditure / revenue accounts classification. Such additional accounts are called closing accounts. _8/ There are exactly two of them. One is the income statement ("total income" in Figure 2), the other is the balance sheet. When the total period is under observation, the balance sheet is not relevant, because in liquidation at the end of the total period the balance sheet becomes an empty set. Note that no distinction has yet been made between expenditures and expenses. 223. Accrual Basis Accrual basis is applied in the Finland just as it is applied in the USA. It is applied in accordance with the realization convention. Thus expenditure-revenue accounting is not any different in this respect from accounting based on the GAAP. In order to accommodate for the application of the accrual basis, accounts receivable and accounts payable are augmented. This is elucidated by Figure 3. Figure 3. Accrual Basis in Recording Transactions Revenue Accounts C a s h Accounts Expenditure accounts receivable + - payable accounts ========= ---------- ------- --------- =========== 1 ! ! ! ! ---------} ! 2 ! ! ! --------} ! ! 3 ! --------} ! ! ! ! 4 ! ! ---------} ! ! ! The transactions depicted in Figure 3 are 1. Purchase on credit 2. Settlement of this credit 3. Credit sales 4. Payment for the credit sales is received. 3. Accounting for Segments of the Total Period _9/ 31. Segmenting a Total Period 311. Reason for Segmenting It is obvious that income determination is trivial if the total period is under observation. Income must, however, be determined for periods which usually are much shorter than the total period. The total period must therefore be segmented into time intervals called accounting periods. In financial accounting this accounting period almost always is one year. In expenditure-revenue accounting the stated reason for the need of yearly income determination is assessing annual distributable profit. Originally, nothing was said or assumed of managerial reasons for income determination. 312. The Congruence Principle The adoption of the congruence principle is a central issue of Professor Saario's expenditure-revenue accounting: Per definition, the sum of annual profits (for accounting periods making up the total period) is equivalent to the total profit (providing that no mistakes are made). Thus in expenditure-revenue accounting the annual profits are considered nothing more than logically dependent slices of the total profit. The purpose of accounting is consequently defined as splitting the total profit into annual profits of the right size. My ensuing interpretation is the following. In expenditure-revenue accounting the timing of the annual profits is considered inconsequential providing that it does not affect the distribution of profits. Thus early annual profits are not assumed to be preferred to later annual profits, since only the total profit is assumed to count. This means an implicit assumption of zero cost of capital to the owner (entrepreneur), i.e. there is no time value of money in the expenditure-revenue accounting thinking. To recapitulate, I define p(t) = annual profit in year t P = total profit (same as total income Formula (1)) f = the year of the foundation of the firm t(o) = the year of the latest accounting period q = the year of liquidation then in expenditure-revenue accounting we obviously must have t(o) q The sum of (2a) sum p(t) + sum p(t) = P if t(o) annual profits t=f t=t(o)+1 is less is defined by than q the total profit P, not vice versa. q (2b) sum p(t) = P if t(o) is at or beyond q t=f 313. Discussion on the Causal Relation between Annual and Total Profits As can seen from the above, my conclusion is that in expenditure-revenue accounting model the annual profits are dependent on the total profit, _10/ not vice versa! The total period ends when the firm has served its task in generating a total profit, i.e. the desired purchasing power for the entrepreneur. In my view the following counter argument, concerning the logic of the foundations of expenditure-revenue accounting, can be made at this point. If the annual income of the firm is positive, the firm is seldom liquidated. If, however, negative annual incomes are observed for a prolonged length of time, the firm is likely to be dissolved. _11/ Because the future is uncertain, the historical annual incomes are used by the management and other interested parties as (at least one) criterion in deciding whether to continue operations or dissolve the firm (assuming that the decision makers behave rationally). According to this practical reasoning, it would be the annual incomes that determine the length of the total period and the total income, rather than the other way round, as is assumed in the expenditure-revenue accounting model. Historical observations, which by necessity always are the basis for predicting future, would then be the determining factors rather than a completed profit earning task. The direction of the relationship between the total profit and the annual profits used in expenditure-revenue accounting seems to indicate an implicit assumption of perfect knowledge of the future. Otherwise income determination is inconsistent until the firm is dissolved. If the argument put forward is accepted that the firm is dissolved when annual incomes continuously remain negative, a circular reasoning results in expenditure- revenue accounting model. This controversy has remained ignored and unresolved for nearly to fifty decades by now. _12/ 32. Principles of Annual Income Determination 321. Annual Closing of Accounts In expenditure-revenue accounting the underlying function of the annual closing of accounts _13/ is taken to be the allocation of the relevant portion of the total profit to the accounting period under observation. In order to calculate the annual income, the realized revenues are first allocated to the pertinent accounting period. After that, the relevant expenditures are matched against these realized revenues as expenses. The realization convention applied for recognizing the realized revenues of the accounting period, is the same as in GAAP, and is therefore discussed no further. As will be seen, the matching convention applied is very similar to the GAAP convention. Differences occurring in the point of view result from the different assumption about the going-concern convention. 322. Expenses and Unexpired Expenditures In order to determine annual income, the expenditures have to be divided into two categories. The expenditures, which are deducted from the realized revenues of the current accounting period, are called expenses. The other part, which is not yet deducted from the realized revenues, is called unexpired expenditures. In the annual closing of accounts, the unexpired expenditures become assets._13/_14/ They always will be converted into expenses in the later accounting periods, latest by the end of the total period. Technically, the unexpired expenditures are transferred to the later accounting periods via the balance sheet. For expenditure-revenue accounting the balance sheet thus becomes necessary as an auxiliary account, when total profit has to be allocated to individual accounting periods for annual income determination. No accounting practice difference seems to exist here from accounting based on the GAAP, which includes the same dichotomy between assets and expenses. In American accounting literature, however, the sequence of reasoning is often given in a different order when compared with expenditure-revenue accounting. That is: "when incurred, expenditures represent assets, which then expire, either instantaneously or eventually, and thus become expenses". This is a noteworthy conceptual difference. 323. The Matching Convention Expenditures are matched, as expenses, against the realized revenues of the different accounting periods. Finally all the expenditures must be thus allocated, in the form of expenses, to the accounting periods making up the total period. The basis of matching in expenditure-revenue accounting is given by the association between expenditures and revenues, and the congruence principle discussed earlier. From the association principle ("expenditures are a prerequisite for revenues") it follows that expenditures expire only when the associated revenues are earned. From the congruence principle ("the sum of annual profits is equivalent to the total profit") it follows, if the principle is applied in a consistent manner, that no losses should be reported for individual accounting periods if the total income will be positive, i.e. a total profit occurs. _16/ The following principle has been propounded by Professor Saario in accordance with the reasoning above. "In periods with little or no realized revenues, little or no expenditures can become expenses". In actual practice it is seldom possible to establish the true _17/ association between expenditures and revenues. _18/ This fact gives rise to various pragmatic rules for assessing which of the expenditures have expired and should thus be written off as expenses (and which expenditures still are unexpired, and should consequently be entered on the balance sheet). For example, the relevant Finnish legislation has adopted the rule that all expenditures which are no more expected to produce revenues, are expenses. This rule can be regarded as a corollary of the association and congruence principles, when applied to matching. -- The role of expectations is in my opinion important here. If the underlying principle for watching were given as "expenditures which no more produce revenues have expired (since corresponding future revenues are known not to exist)", then, taken strictly, a perfect knowledge of the future would be required with respect to future revenues. Assumptions made about the knowledge of the future necessarily are critical in any accounting model, since by definition they should be based on historical transactions (ex post) rather than future transactions (ex ante). _19/ In the original presentation of expenditure-revenue accounting, it has been emphasized that in the framework of the dichotomy of expenditures ("expenses"/"unexpired expenditures = assets"), all assets valuation rules should be seen as nothing but matching rules for annual income determination. A point that will be taken up further on. 33. Special Topics This section reviews the ideas of priority order of matching and realization depreciation method, which are sidelines related to expenditure-revenue accounting. This part can be skipped without a loss of continuity. Because of space limitations, it will not be possible to analyze the underlying concepts at length, but the priority order of matching, and realization depreciation are nevertheless taken up here because they are interesting facets of the Finnish accounting research history. 331. Priority Order of Matching As has been seen, assuming a total profit, annual expenses must not exceed annual realized revenues according to the theory of expenditure-revenue accounting. This notion gives rise to the question of the manner in which the expenditures should be deducted from the revenues. The fact is that since expenditures precede corresponding revenues, the expenditures gradually become covered by the revenues as they are realized. It has been suggested that costs, and hence expenditures are covered by revenues, not proportionally, but in a definite priority order. The statement in the Finnish language of the relevant theory, in Finland called "The Priority Order Theory of Costs" is attributed to Professor Martti Saario _20/, and its later refinement to Professor Jaakko Honko. _21/ Two criteria were originally considered for determining a priority order of matching. The first was the length of time it takes an expenditure to cycle once. This criterion was, however, found unsatisfactory already in the original presentation. Instead a second criterion was put forward as the theoretically right one. This was the number of products or revenue items associated with the expenditure. The smaller this denominator, the higher the priority of the expenditure. The following illustration gives the original priority order of matching suggested. Direct labor Direct materials Variable overhead Administrative expenses Equipment and machinery Plant Land Entrepreneur 332. Realization Depreciation Depreciation is one of the most controversial issues in accounting. Depreciation is to allocate a "long-term" expenditure as expenses over the revenue-producing life-span of the expenditure. _22/ The most popular depreciation methods in company practice are the straight-line, double declining-balance, units-of-production, and the years'-digits _23/ methods. Double declining-balance and the years'-digits methods are accelerated depreciation methods, i.e. methods with decreasing depreciation charges. They often are advocated on the basis of an alleged diminishing revenue-earning power resulting from economic and physical age. _24/ An entirely different pattern of depreciation is suggested in "compound interest" (or "annuity") depreciation method. The revenues associated with the long-term expenditure are assumed to be made up by two parts. The first is the return (interest) on the long-term expenditure. The rest is the amount of the long-term expenditure recovered = depreciation. With the passage of time the part due to interest decreases, when the unrecovered portion of the expenditure gradually decreases. Consequently, the annual amount of the expenditure recovered increases. Thus,a depreciation method with increasing depreciation charges results. _25/ Next we discuss the idea of realization depreciation in more detail. The basic assumptions of expenditure-revenue accounting, discussed throughout this paper, originate from Professor Saario's doctoral dissertation in 1945 on the "realization principle and depreciation of fixed assets", and foremost from his papers in 1958 and 1959. _26/ In his dissertation and a later paper in 1961 _27/ he put forward the realization depreciation method: As was discussed earlier, from the association principle of expenditures and revenues it follows that expenditures expire (become expenses) only when associated revenues are realized. As we saw, from congruence principle it follows that losses are not consistent for any of the accounting periods if the net income for the total period is positive. Depreciation (an expense) is, consequently, strictly tied to the revenues produced by a long-term expenditure. _28/ Therefore, in accordance to this thinking, depreciation has absolutely nothing to do with physical aspects of the relevant assets. In periods of no revenues no expense is relevant, and no depreciation can thus be made then. The idea of realization depreciation is, on the basis of the principles above, that depreciation is directly dependent on the associated revenues, being thus a function of them. The relation is given by the internal-rate-of-return model. To illustrate, consider an extremely simple numerical example involving an expenditure of $100 at the beginning of the first year, and revenues of $57.6 at the end of the first and the second year. The internal rate of return on this investment is 10%, since $57.6/1.10 + $57.6/1.102 = $52.4 + $47.6 = $100. The depreciation for the first year is $52.4 and $47.6 for the second. Contrary to the compound-interest depreciation method, which is also based on the rate of return on the long-term expenditure, realization depreciation usually leads to an accelerated depreciation pattern. _29/ 34. Treatment of Expenditure, Revenue, and Financial Accounts in Closing Figure 4 illustrates the principle of the closing process by depicting the closing entries for expenditure-revenue bookkeeping. _30/ Figure 4. Closing Entries Expenditure Revenue Financing accounts accounts accounts =========== ========= ========= ! ! ! ! : : ! :: ! :: : : :: :: : : .....................::...:: : : : ...................::....: : : : : :: .........: : : : ::........ : : : : : : : Income : : : Balance :...... : : statement : : : sheet : : : account : : : account : : matching ------------------- : : : ------------------ : : o..} expenses ! revenues {.: : :.} cash ! : : : ! : ! payables {.: : : ! :...} receiv- ! : : ! ables ! : : ! ! capital {.....: :.............+...................} unexpired! ! expendi- ! ! tures ! ! ! profit {-+------------------------------+-} profit ! ! In order to calculate the annual net income all realized revenues and expenses of the accounting period are gathered from the books on the income statement account, which is the first closing account. The annual net income is given by the balance of the income statement account. Unexpired expenditures and financing accounts are closed on the balance sheet account, which is the second closing account. Undistributed profit is entered on the credit-side as retained earnings. _31/ Thus the concept of retained earnings, which is central in accounting based on the GAAP, does not come up in expenditure-revenue accounting at all before this stage. The function of the balance sheet is to transfer the ending balances of the unexpired expenditures and the financing accounts on to the next accounting period, where they become the beginning balances of the relevant accounts. The balance sheet does not have the same conceptual emphasis as a statement of the financial position of the firm as in accounting based on the GAAP. Income determination is the underlying purpose of expenditure-revenue accounting. As has been discussed at great length in this paper, matching naturally is the critical stage of annual income determination. All rules affecting matching through determination of expenses or unexpired expenditures affect the annual income. It was stated earlier in this paper that in expenditure-revenue accounting it is emphasized that all asset valuation rules are nothing but matching rules for annual income determination. In other words any valuation of the balance sheet items should be considered a valuation of the annual income. The reasoning is easily demonstrated by writing out the fundamental equation of matching elucidated by Figure 4. Expenditures = Expenses + Unexpired expenditures (income statement) (assets/balance sheet)

السلام عليكم ورحمة الله وبركاته هلا وغلا بجميع الاعضاء عندي بروجكت مهم في مساق intermediate accounting واتمنى القى الافادة منكم 2- Prepare the required journal entries and accounting treatments for following situations: Depositing the founders the required cash.Paying different expense before the incorporation (such as feasibility study expenses and legal fees, and stationary expenses). What is the appropriate accounting treatment for such expenses (before and after the incorporation).Issuing common stock (cash and in-kind)In the case of receiving more cash form the investors than the required capital, what is the appropriate accounting treatment in such a situation.What are the procedures required to increase a capital in a listed company in the UAE? Name four accounting treatments that can be used for such a situation (increasing the capital) and prepare the journal entries. Name three accounting treatments that can be used for decreasing the capital and prepare the journal entries (if any).هذا الجزء الثاني من السؤال طبعا جوهر السؤال هو خطوات تأسيس incorporating a public joint stock company في الامارات فياليت تساعدوني واكون شاكرة لكم .. جزاكم الله كل خير وبارك فيكم ..

The rule would have required companies to take a more stringent approach to reporting uncertain tax positions on their financial statements. أكثر...

[align=left:e5fae15d2d]Financial Statement Basics Understanding of the 3 financial statements – (balance sheet, income statement and statement of cash flows). What does each financial statement represent? The Balance Sheet (BS) presents a firm’s investments and financing at a moment in time.  What is the financial position, or financial health, of a firm? The Income Statement indicates the net income for a period of time (profit margin = net income / revenues).  How profitable is the firm? The Statement of Cash Flow reports the net cash flows derived from operating, investing and financing activities for a time period  Is the firm generating sufficient cash flows from its customers to finance operations and to acquire buildings and equipment or must it seek new funds from lenders or owners? What is the structure of each statement? Balance Sheet Investing Financing Assets = Liabilities + Shareholders’ Equity Assets are economic resources with the ability or potential to provide future benefits to a firm. Current assets (e.g. cash, short term securities, accounts receivable, inventories) are consumed or turned into cash within one year of the date of the balance sheet. Liabilities are creditors’ claims on the assets of a firm and show the sources of the funds used to acquire the assets. Current liabilities require payment within one year, long-term debt within more than one year. Firms typically finance current assets with current liabilities and vice versa. Shareholders’ equity shows the amounts of funds owners have provided and their claims on the assets. Shareholders’ equity comprises contributed capital (e.g. common stock, additional paid in capital) and retained earnings. Income Statement Revenue – Expenses = Net Income Cash Flow Statement 3 sections: Operating Investing Financing What is the link between the three statements? Relation of Income Statement to Balance Sheet Income Statement links the balance sheet at the beginning of the period with the balance sheet at the end of the period. Balance sheet amount for retained earnings represents the sum of prior earnings of a firm in excess of dividends. The amount of net income helps explain the change in retained earnings for the period. Retained Earnings (Start of Period) + Net Income for Period – Dividends Declared and Paid = Retained Earnings (End of Period) Relation of Cash flow Statement to Income Statement and Balance Sheet CFS explains the change in cash between the beginning and the end of the period. The statement of cash flows also sets forth the major investing and financing activities for the period. Thus the statement of cash flows also helps explain changes in various items on the comparative balance sheet. The statement of cash flows parallels the income statement by showing the relationship between net income and cash flow from operations. Income can be rising but cash flow can still decline if the business does not collect cash from its customers. Summary Financial Position – Balance Sheet Profitability – Income Statement Cash generating ability – Statement of Cash Flows Understanding of the basic mechanics of financial accounting – (debits, credits, transaction journal entries, adjusting entries, closing entries, t-accounts, trial balances and financial statements) Accounting Process  Journalizing in General Journal  Periodic Posting to Appropriate Accounts  Preparation of unadjusted trial balance  Correction and adjustment of trial balance  Preparation of financial statements Typical Journal Entry Date Account Debited $Debit Account Credited $Credit Explanation of transaction or event being journalized e.g Date Cash $Debit Equipment $Credit Purchase equipment costing $X in cash. Posting happens periodically (e.g. weekly or monthly). Amounts from General Journal are posted to the General Ledger. T-Accounts are used. Trial Balance Preparation: Lists accounts in general ledger with a trial balance as of a particular date. Equality between sums of debit account balances and credit account balances helps check the accuracy of arithmetic. Trial Balance After Adjustment and Correction: Errors and omissions. Unrecorded events. E.g pre-paid items such as insurance, the costs of which are accrued over the life of the policy. Normally done by preparing a journal entry. Financial Statement Preparation: Can be done after corrections and adjustment. Balance sheet How are assets and liabilities valued on the balance sheet? Asset valuation Methods: Acquisition (historical) cost; current replacement cost, current net realizable value, present value. Monetary assets generally appear on the balance sheet at their net present value, their current cash or cash equiavalent value. E.g. cash, marketable securities, accounts receivable. Noncurrent monetary assets are therefore discounted. Nonmonetary assets (e.g. merchandise inventory, PPE) generally appear at acquisition cost, in some cases adjusted downward to reflect that the firm has consumed some of the assets‘ services and, in others, to recognize some declines in market value. Note impairments, depreciation or holdings losses or mark-to-market. Liability valuation Most liabilities are monetary. Those due within one year or less appear at the amount of cash the firm expects to pay to discharge the obligation. If long term (due in more than one year), e.g long term bonds appears at the present value of the future cash outflows. Nonmonetary liabilities: a liability that involves delivering goods or services other than cash. E.g. a warranty, cash advance. Such a liability appears on the balance sheet at the estimated cost, a cash advance appears at the amount of cash received. What are the components of stockholders’ equity section? Common Stock: amounts received equal to the par or stated share value Preferred Stock: amounts received for stock that has some preferences Additional Paid-in Capital: received amounts in excess of par or stated value Retained Earnings: increase in net assets due to generated earnings. Treasury Shares: the cost of shares reacquired by the firm itself. How is US GAAP different from other countries? Structure of the balance sheet US GAAP Other countries Current assets Noncurrent assets Noncurrent assets Current assets Current liabilities Long-term debt / liab. Shareholders equity Shareholders equity Long-term debt / liab. Current liabilities Terms used for accounts US Other countries - Property, Plant Equipment - Investment in securities - Accounts receivable - Cash - Common Stock - Additional paid-in capital - Retained earnings - Bonds payable - Notes payable to Banks - Accounts payable - Tangible Fixed Assets - Financial Assets - Trade receivables - Liquid funds - Subscribed capital - Capital reserve - Profit reserves, Net income available for distribution - Bonds - Due to Banks - Trade payables Mark to Market versus Historical Cost Some countries allow firms to mark fixed assets (PPE) to market whilst in the US this is only allowed for Marketable Securities (Trading Securities and Available for Sale). Income Statement What is the difference between cash and accrual accounting? Cash accounting: measures the performance of a business from the selling and provision of goods and services based on the cash received from customers. Problems with cash accounting:  Inadequately matches inflows and with the outflows and efforts associated with them.  Unnecessarily delays the recognition of revenues (revenue is recognized only when cash is received).  Provides opportunity to distort the measurement of operating performance (by delaying payments to suppliers at the end of an accounting period, for example) Hence, we use accrual accounting, which recognizes revenue when a firm sells goods or renders services. Expenses are measured using the matching principle, whereby cost expirations are matched to revenues (or economic benefits). When do I record revenues under accrual accounting? Revenues are recorded when they are earned and realizable. This is defined as follows: Earned: A firm has performed all, or most of, the services it expects to provide. Realizable: The firm has received cash or some other asset such as a receivable, whose cash equivalent can be measured with reasonable precision. The above is taken from Stickney and Weil. Another variation of the definition is that revenues are recognized when it is ‘realized or realizable and earned’. To achieve this standard the following criteria must be met:  Persuasive evidence of a sales agreement exists  Delivery has occurred or services have been rendered  The selling price is fixed or determinable  Collection is reasonably assured. The above points come from SEC Staff Accounting Bulletin 101, which was issued in 1999. When I record revenue should I record other things as well? If a firm recognizes revenues in a period before it receives cash it should also take the following factors into account in determining how much of the total revenue to recognized. Uncollectible accounts; i.e. some people will not pay – estimate how many will likely not pay based on previous experience. Sales Discounts and Allowances – Some customers may be provided with discounts for prompt or early payment. Sales returns – Some customers may return the goods for refund. Each of the above must be reliably estimated and the amount of revenue recognized is reduced as appropriate. When do I record expenses under accrual accounting? As assets provide future benefits to a firm, expenses measure the assets consumed in generating revenue. Expenses are ‘expired costs’ or gone assets. Criteria for expense recognition:  Matching principle – If particular revenue causes an asset to expire, that expiration becomes an expense in the period when the firm recognizes the revenue. This treatment – the matching principle – matches cost expirations with revenues.  If no particular revenue causes an asset to expire, that expense becomes an expense of the period in which the firm consumes the benefits of that asset in its operations. Examples… Product costs: Cost of goods sold is recognized as an expense when a firm sells the goods. A firm which buys raw materials and through its operations transforms them into a finished product only recognizes the direct material cost, direct labor cost and manufacturing overhead cost as expenses when the goods are sold, not when they are purchased and paid for. (Matching principle.) Marketing costs: Relate primarily to the revenues of the period and these are thus recognized as expenses in the period that they occur. They are thus referred to as period expenses. It could be argued that certain marketing costs (e.g. advertising) produce a future benefit and should thus be treated as an asset (AOL famously did this in the mid 1990’s and was later sued by the SEC). Hence most accountants have a problem to quantify the future benefit (if there is one at all), hence in normal situations marketing costs are recognized as expenses in the period in which they are incurred. They are normally classified under Sales and General Administrative Expenses (SG & A) by US listed companies. Administrative costs: E.g. presidents salary, accounting and IT system costs are recognized in the same way as marketing, i.e. as period expenses and are also generally classified under SG&A. When do I record asset impairment charges under accrual accounting? Asset impairment – GAAP require a three-step measurement process for measuring impairment on assets other than intangibles not requiring amortization. 1. Compare undiscounted future cash flows from the assets with their book value (e.g. a property which is rented out). The impairment loss is the amount of the book value, which exceeds their fair value (either present value of the future cash flows or market value). 2. Compare book value to market value. Impairment loss is the excess of book value over market value. 3. At the time the firm judges an impairment loss has occurred, the firm writes down the book value of the asset to fair value. Fair value being 1) market value or 2) if the firm cannot assess market value, the net present value of the expected future cash flows. The journalizing process is as follows: Date Accumulated depreciation $Total amount of Accumulated Depreciation attributed to the asset since acquisition Asset e.g. Building – (New Valuation) $New value of the building Loss on impairment $Difference between book value and fair value Asset e.g. Building – (Book Valuation) $Current book value of asset (normally acquisition cost of asset minus any impairment losses recognized previously) Effect on different statements: Balance Sheet Decreases assets by amount of impairment loss Decreases shareholders equity. (Retained earnings?) Income statement Appears a loss on income statement Cash flow statement Need to increase net income by amount of impairment loss since its not a cash flow When do I record restructuring charges under accrual accounting? Restructuring charges are constructive liabilities. A constructive liability arises not from an obligation but from management intent. For example, intent to close a plant, layoff employees and to make severance payments in amounts not yet determined. These are often referred to as restructuring charges and journalized as follows: When liability is recognized: Date Restructuring Charges $Total amount expected to be incurred in the event Liability for severance pay to employees $Total amount expected to be incurred in the event When liability is incurred (i.e. paid) Date Liability for severance pay to employees $Total amount consumed by the event Cash $Total amount consumed by the event Sometimes, a constructive liability may be overestimated. In that case, the following is done to reverse part of the initial charge. Date Liability for severance pay to employees $Total amount expected to be incurred in the event Reversal of Restructuring Charges $Total amount expected to be incurred in the event Reversal appears in income at the end of the year and is hence open to abuse by management. Some companies take a ‘big bath’ by overestimating restructuring charges associated with a planned event and afterwards reverse the amount not required in the restructure to boost income in a subsequent period. Analysts and investors hence do not like to see companies do this and are generally pleased to see a company make accurate estimates of restructuring charges. Effect on different statements of constructive liabilities can be summarized as follows: Statement At estimation of liability When liability is incurred At estimation of liability Balance Sheet Increase liabilities by amount estimated Decreases shareholders equity (through retained earnings) Decreases liabilities Decreases cash Decreases liabilities Decreases shareholders equity (through retained earnings) Income statement Appears a loss on income statement No effect (already accounted for as an expense when estimated) Increases net income Cash flow statement Need to increase net income by amount of estimated. Need to decrease net income by actual amounts of cash paid. Need to increase decrease net income by amount of reversal. [/align:e5fae15d2d]