LO2-01: Explain the nature and general purposes of financia l statements.
LO2-02: Explain certain accounting principles that are important for an understanding of financial statements and how professiona l judgment by accountants may affect the application of those principles.
LO2-03: Demonstrate how certain business transactions affect the elements of the accounting equation: Assets = Liabilities+ Owners' Equity.
LO2-04: Explain how the statement of financial position, often referred to as the balance sheet, is an expansion of the basic accounting equation.
LO2-05: Explain how the income statement reports an enterprise's financial performance for a period of time in terms of the relationship of revenues and expenses.
LO2-06: Explain how the statement of cash flows presents the change in cash for a period of time in terms of the company's operating, investing, and financing activities.
LO2-07: Explain how the statement of financial position (balance sheet), income statement, and statement of cash flows relate to each other.
LO2-08: Explain common forms of business ownership - sole proprietorship, partnership, and corporation - and demonstrate how they differ in terms of their statements of financial position.
LO2-09: Discuss the importance of f inancial statements to a company and its investors and creditors and why management may take steps to improve the appearance of the company in its financial statements.