Accounting is the language of business. It is important to have some understanding of accounting standards and the financial statements.

The term GAAP, or generally accepted accounting principles, refers to the standards promulgated by the Financial Accounting Standards Board (FASB). All US publicly held companies, and other companies audited by external auditors, must adhere to these standards.

The four financial statements required by US GAAP are:

• The income statement
• The balance sheet (or statement of financial position)
• The statement of cash flow
• The statement of retained earnings

The financial statements are based on the accounting equation, i.e.

Assets = Liabilities + Equity

Public companies must file a number of reports with the Securities and Exchange Commission (SEC), including quarterly and annual financial statements. These statements are typically released to the public and published on the corporate website. The annual report is traditionally associated with the release of financial information to the public.

The Profession

The American Institute of Certified Public Accountants (AICPA) states on its homepage (http://www.aicpa.org/Career/CareerPaths/Pages/CareerPaths.aspx) that the below specializations are available career paths to a licensed public accountant (CPA).

• Forensic and Valuation Services Taxation
• Fraud Prevention, Detection, and Investigation
• Audit
• Business and Industry/New Finance
• Government
• Personal Financial Planning
• PrimePlus/ElderCare
• Employee Benefit Plan Audit
• Information Technology (IT)

For further information about the CPA profession and rules for licensing, go to the websites for AICPA or the National Association of State Boards of Accountancy (NASBA).

Required Materials

Accounting Concepts and Principles (2015) Pearson Learning  Solutions, New York

Accounting for McDonald’s  (2015) Pearson Learning  Solutions, New York

Accounting and the Business Environment (2015) Pearson Learning  Solutions, New York

Baruch College, The University of New York (2008). Guide to Financial Statements. This is a 45-minute interactive video presentation with audio. It is an excellent introduction and overview of financial statements. You do not have to watch the whole presentation at one time since it is easy to restart at different points. The information is also available in a PDF file.

Benedicto, M.S. (2008) Introduction to Financial Accounting. IE Business School. A multimedia presentation. The information is also available in a PDF file. Click on “Financial Statements" tab and "Practical Example" tab. Retrieved from http://openmultimedia.ie.edu/OpenProducts/financial_accounting/financial_accounting/frames.html