Week 35 (16.12.07)

Learn

Module 1: Fundamentals of Finance and Accounting for Nonfinancial Managers

• The accounting equation: Assets = Liabilities + Equity
• Revenues : Money earned from product sold
• Expenses : Costs incurred running the business
• Generally accepted accounting principles (GAAP) are a standardized set of accounting practices. Audited statements normally conform to GAAP.
• GAAP has 3 assumptioons:

1. Fiscal period : usually 1 year
2. Use of historical cost : as basis for valuing assets
3. Conservatism : losses be recognized as soon as can be quantified; gain recorded when earned

• To conform to GAAP, business must use "accrual-basis" accounting. 2 assumptions:

1. Revenues are recognized when they are earned
2. Revenues are matched with the expenses

• Accrual accounting indicates the profitability of the organization, but it is not a reflection of the organization's cash portion.

Unlearn

Did not realize that in accounting reporting, accrual is taken into calculation versus cash-accounting.

Relearn

Started to learn to read financial report by download from Pfizer website. Seek help from colleague whom has accounting background to guide in assessing the report. Had a discussion on what FIFO, LIFO and weighted average cost means.