Table of Contents
Instructions
Respond to both of the following questions in APA format:
- Give an example of a company that did not deal effectively with change, showing the consequences and what happened to the company; did it renew, endure, merge, or fail? Chapter 2 provides some examples. You may research those or research your own example.
- List the 4 ARTistic accounting attributes listed in the text (include repeatability). Give your own short explanation of each and make your own example of using these financial statement attributes for a real or hypothetical company.
Textbook entry:
1. Accurate—Prepared with sufficient accuracy to be relied upon, and yet without requiring such a high degree of accuracy as to make them too expensive or too time-consuming to produce. This balance concept in financial reporting is called materiality. Generally, a transaction is con-sidered to be material if the financial report reader would be likely to be influenced by knowing it. Materiality is usually evaluated in terms of the amount of money involved, relative to the whole.
2. Relevant—Presented in a format that is useful to those who must use the information. A detailed listing of transactions with no totals or explanation might be accurate, but it’s of little use to anyone and, so, likely irrelevant for most business purposes.
3. Timely—Produced in time to be useful to those who need it. A totally accurate, relevant report that comes out many months late is of little value because managers likely will have had to make decisions before it was available.
4. In addition to stability, one of the key characteristics of the account-ing process is repeatability. The accounting process achieves the highest degree of accuracy, relevance, and timeliness by use of its repetitive methodologies, enabling accountants to process the most data at the
TRICKS least cost. The most common repetitive process in the accounting world is the monthly closing cycle. A company goes through the traditional monthly routine of “closing the books” to see how the company is doing in terms of its financial objectives, including profitability. That account-ing cycle, and the information value it produces, is perhaps best demon-strated by not going to a football game.
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