Analysis of Financial Accounting Methodologies and Applications

Culbertson, Kate (2017) Analysis of Financial Accounting Methodologies and Applications. Undergraduate thesis, under the direction of Victoria Dickinson from Accountancy, University of Mississippi.

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This thesis consists of a series of case studies on various areas of financial accounting. The areas of financial accounting discussed include inventory valuation, relevant income and assets, statement of cash flows, accounts receivable and estimations, inventory and revenue recognition, depreciation, international accounting standards, long-term debt, stockholders’ equity, securities, income and regulation, deferred taxes, and pension and retirement plans. In the financial accounting case on inventory valuation, two companies’ financial statement values were analyzed through evaluating the related balance sheets and income statements to determine which company would be a better investment. Through ratio analysis related to profitability and liquidity of the companies, it was determined that Glenwood Heating, Inc. is the better potential investment. For the second case on financial accounting, several different kinds of income and assets were evaluated to determine which income statement and balance sheet accounts are most relevant for investors and other users of the financial statements. The income accounts that were considered include persistent income, equity income, interest income, and other income from operations. The the asset accounts that were determined critical for decision making by investors and other users of the financial statements include total operating assets, assets from affiliates, and investments. The third case provides a thorough discussion and explanation on the purpose, format, and usage of the statement of cash flows. The purpose of the statement of cash flows is to report cash receipts or inflows and cash payments or outflows during the fiscal period. For the fourth case, Accounts Receivable and Estimations, several different contributors to the accounts receivable account are discussed and analyzed for a specific company, Pearson. Accounts that affect accounts receivable include current receivables, trade receivables, allowance for doubtful accounts, and allowance for sales returns. Additionally, journal entries are expressed to show how the specific account affects accounts receivable. The fifth case addresses the revenue recognition financial accounting principle to determine if a specific company, GAC, has accurately calculated financial statement accounts, such as revenue, accounts receivable, inventory, and unearned revenue. Through an evaluation of the revenue recognition principle and GAC’s financial statements, it was determined that the company was breaking the revenue recognition principle and must change the account values accordingly. The sixth case evaluates different depreciation methods considering both legal and illegal methods for decreasing depreciation expense in the fiscal period. Northwest, Delta, and United Airlines used legal methods to depreciate the same asset different over a certain period, but Waste Management used illegal depreciation methods to falsify earnings to investors, the public, and the SEC. The seventh case explains the differences between GAAP and IFRS when accounting for various liabilities. For the eight case, long-term debt was evaluated in Rite Aid to explore different kinds of debt, methods of issuance, interest expense, and discounts on bond payables through journal entries and calculations. The ninth case, Stockholders’ Equity, evaluates the common stock, treasury stock, dividends, and related ratios in two companies to consider different method for accounting for these values and transactions and to determine what the resulting values tell investors about the company. For the tenth case, State Street Corporation’s financial statements were analyzed to determine what securities the company current held. Through exploration of the unclassified balance sheet, it was established that State Street Corporation held trading securities, listed at fair value, available-for-sale securities, listed at fair value, and held-to-maturity securities, accounted for at amortized cost. The eleventh case considers several large corporations’ business models to establish what risks these companies face and which aspects of the financials are most important in determining risk. It was decided that revenue and revenue growth are more important than income and income growth. For the twelfth case, ZAGG, Inc.’s financial statements were analyzed to determine what factors contribute to the total income tax calculation for a company with international operations. The factors included in the income tax calculation were tax at federal statutory rate, state tax, non-deductible expense, domestic production activities deduction, return to provision adjustment, and increase in valuation allowance. The thirteenth case, explores and explains defined contribution plans and defined benefit plans and considers related advantages and disadvantages.

Item Type: Thesis (Undergraduate)
Creators: Culbertson, Kate
Student's Degree Program(s): B.Accy in Accountancy
Thesis Advisor: Victoria Dickinson
Thesis Advisor's Department: Accountancy
Institution: University of Mississippi
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Depositing User: Kate Culbertson
Date Deposited: 01 May 2017 14:23
Last Modified: 01 May 2017 14:23

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