Chapter 3 KCQ's

I find that the way financial reports are introduced in chapter 3 of the study guide is unnecessary and just caused me to be more confused with the concept. It would have been more helpful to just get straight into it and explain it in detail to begin with.

The 2^nd paragraph states ‘ we will see that there are four general-purpose financial statements some businesses are required to provide: the balance sheet, income statement statements of change in equity and cash flow statement.’ I found this a much more useful way to get the information across, by just plainly saying it so it wasn’t confusing and further explaining that there is much more to these statements then just their names.

The advice given on page three about the importance of footnotes was helpful to me because prior to this I was somewhat confused about the note numbers.

As interesting as the little pieces of information are about Ryman Healthcare’s names for their retirement villages and the important roles these men have had in society I find that it just puts me off topic and side tracks me from the point of the study guide, introducing financial statements.

Does it affect the Parent company if some of the subsidiaries are not 100% owned by them?

I found it important to know and easily set out in the study guide that together the balance sheet and the income statement provide all five elements of accounting: assets, liabilities, equity, revenue and expenses. Which is also the extended fundamental accounting equation: assets + expenses = equity + revenue + liabilities.

The section focusing on changes in equity statement seems to rush through and as a result I had some troubles understanding a changes in equity statement.

‘The moment we run out of cash, no matter how many other assets we might have or profits we might be making, we are in trouble; serious trouble.’ This specific sentence in the cash flow statement section stood out to me as an important piece of information involving cash flow statements.

I from the ‘Trust relationship in business’ section that everything a firm does has two effects and I feel that this was portrayed through the writing very well to show its importance.

Why does the firm keep changes to revenue and expenses separate for a period of time?

The introduction to ratio’s paragraph I found was difficult to follow and even more difficult to find the points that seemed relevant and useful to understand and know.

I felt that in section 3.3 of the chapter it went on and on explaining something that was covered in the last paragraph. I also found that this last paragraph (particularly the 2^nd last sentence) was very easy to understand for a non-accounting backgrounded person like me and it was because of this that I understood that particular section.

Whilst reading section 3.4 of the chapter I found the example of the $20 note very helpful the full effect of value.

‘The only way we know how to value any asset r business is to value it based on the cash flow we expect to gain from it in the future.’ was something that stood out to be important in the future.

I found the cash flow subsection of section 3.4 extremely long and confusing with all of the different terminologies and brackets explaining these.

The conclusion of this chapter was set out very well in the way it briefly summarised everything allowing me to ensure that I remembered covering the particular points and ensuring I took in the information throughout.

Overall Study Guide Chapter 3 was a helpful piece of text that gave all the relevant information when referring to ‘Introducing financial statements.’ I found the text went on in a tangent in places where it was not necessary causing me to become confused with what it was saying. Another element that that caused me to become confused once again was the lengthy pieces of historical backgrounds, I do believe that to a degree the history is important to understand the text but when they become long it becomes draining and useless information. I really enjoyed the quick quotes that were placed throughout and found them quite entertaining at times and I also really loved towards the end where examples were used more frequently as I learn easier with examples readily available. 

Thanks for checking out my KCQ's for Chapter 3 of the Study Guide

Georgia