on 13-Feb-2017 (Mon)

\(p(c|r) = \frac{p(r, c )}{ p(r)} \) In words, the definition simply says that the probability of c given r is the probability that they happen together relative to the probability that r happens at all

A fontanelle is measured as full, fl at, or
depressed

In young infants, a bulging fontanelle may
be seen with meningitis, but meningismus
is rare before one year of age.

Piperacillin also covers enterococcus, HiPLESS (H influ, proteus, listeria, e coli, salmonella, shigella), pseudomonas, and enterobacter.

1st gen cephalosporins are cephalexin (PO) and cefazolin (IV).

2nd gen cephalosporins are cefuroxime (PO) and cefprozil (IV).

3rd gen cephalosporins are cefotaxime (IV), ceftriaxone (IV), cefixime (PO).

In the cashflow statement direct format, which refers to the operating cash section appearing simply as operating cash receipts less operating cash disbursements. An alternative format for the operating cash section, which begins with net income and shows adjustments to derive operating cash flow, is known as the indirect format. The alternative formats and detailed rules are discussed in the reading on understanding the statement of cash flows.

The format for the operating cash section which begins with net income and shows adjustments to derive operating cash flow, is known as the indirect format .

One observation to make in the balance sheet is: of the increase in total assets, how much is it due to liabilities and how much of equity?

Because accrual entries occur due to timing differences between cash movements and accounting recognition of revenue or expense, there are only a 2 possibilities.

First, cash movement and accounting recognition can occur at the same time, in which case there is no need for accruals.

Second, cash movement may occur before or after accounting recognition, in which case accruals are required.

Unearned revenue (or deferred revenue) arises when a company receives cash prior to earning the revenue. In the IAL illustration, in Transaction 5, the company received $1,200 for a 12-month subscription to a monthly newsletter. At the time the cash was received, the company had an obligation to deliver 12 newsletters and thus had not yet earned the revenue. Each month, as a newsletter is delivered, this obligation will decrease by 1/12th (i.e., $100). And at the same time, $100 of revenue will be earned. The accounting treatment involves an originating entry (the initial recording of the cash received and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue.

In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue.

Unearned revenue (or deferred revenue ) arises when a company receives cash prior to earning the revenue.

In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue.

In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment.

A positive aspect of unearned revenue is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue.

Unbilled revenue (or accrued revenue) arises when a company earns revenue prior to receiving cash but has not yet recognized the revenue at the end of an accounting period. In such cases, the accounting treatment involves an originating entry to record the revenue earned through the end of the accounting period and a related receivable reflecting amounts due from customers. When the company receives payment (or if goods are returned), an adjusting entry eliminates the receivable.

Accrued revenue specifically relates to end-of-period accruals; however, the concept is similar to any sale involving deferred receipt of cash. In the IAL illustration, in Transaction 9, the company sold books on account, so the revenue was recognized prior to cash receipt. The accounting treatment involved an entry to record the revenue and the associated receivable. In the future, when the company receives payment, an adjusting entry (not shown) would eliminate the receivable. In practice, it is important to understand the quality of a company’s receivables (i.e., the likelihood of collection).

In practice, it is important to understand the quality of a company’s receivables (i.e., the likelihood of collection).

Prepaid expense arises when a company makes a cash payment prior to recognizing an expense. In the illustration, in Transaction 3, the company prepaid one month’s rent. The accounting treatment involves an originating entry to record the payment of cash and the prepaid asset reflecting future benefits, and a subsequent adjusting entry to record the expense and eliminate the prepaid asset. (See the boxes showing the accounting treatment of Transaction 3, which refers to the originating entry, and Transaction 3a, which refers to the adjusting entry.) In other words, prepaid expenses are assets that will be subsequently expensed. In practice, particularly in a valuation, one consideration is that prepaid assets typically have future value only as future operations transpire, unless they are refundable.

prepaid expenses are assets that will be subsequently expensed.

In practice, particularly in a valuation, one consideration is that prepaid assets typically have future value only as future operations transpire, unless they are refundable.

Accrued expenses arise when a company incurs expenses that have not yet been paid as of the end of an accounting period. Accrued expenses result in liabilities that usually require future cash payments. In the IAL illustration, the company had incurred wage expenses at month end, but the payment would not be made until after the end of the month (Transaction 11). To reflect the company’s position at the end of the month, the accounting treatment involved an originating entry to record wage expense and the corresponding liability for wages payable, and a future adjusting entry to eliminate the liability when cash is paid (not shown because wages will be paid only in February). Similarly, the IAL illustration included interest accrual on the company’s bank borrowing. (See the boxes showing the accounting treatment of Transaction 8, where Transaction 8 refers to the originating entry, and Transaction 8a, which refers to the adjusting entry.)

As with accrued revenues, accrued expenses specifically relate to end-of-period accruals. Accounts payable are similar to accrued expenses in that they involve a transaction that occurs now but the cash payment is made later. Accounts payable is also a liability but often relates to the receipt of inventory (or perhaps services) as opposed to recording an immediate expense. Accounts payable should be listed separately from other accrued expenses on the balance sheet because of their different nature

In practice, complex businesses require additional accruals that require considerably more judgment. For example, there may be significant lags between a transaction and cash settlement.

In such cases, accruals can span many accounting periods (even 10–20 years!), and it is not always clear when revenue has been earned or an expense has been incurred. Considerable judgment is required to determine how to allocate/distribute amounts across periods.

In contrast to accrual entries that allocate revenue and expenses into the appropriate accounting periods, valuation adjustments are made to a company’s assets or liabilities—only where required by accounting standards—so that the accounting records reflect the current market value rather than the historical cost. In this discussion, we focus on valuation adjustments to assets. For example, in the IAL illustration, Transaction 13 adjusted the value of the company’s investment portfolio to its current market value. The income statement reflects the $2,100 increase (including interest), and the ending balance sheets report the investment portfolio at its current market value of $102,100. In contrast, the equipment in the IAL illustration was not reported at its current market value and no valuation adjustment was required.

As this illustration demonstrates, accounting regulations do not require all types of assets to be reported at their current market value. Some assets (e.g., trading securities) are shown on the balance sheet at their current market value, and changes in that market value are reported in the income statement. Some assets are shown at their historical cost (e.g., specific classes of investment securities being held to maturity). Other assets (e.g., a particular class of investment securities) are shown on the balance sheet at their current market value, but changes in market value bypass the income statement and are recorded directly into shareholders’ equity under a component referred to as “other comprehensive income.” This topic will be discussed in more detail in later readings.

In summary, where valuation adjustment entries are required for assets, the basic pattern is the following for increases in assets: An asset is increased with the other side of the equation being a gain on the income statement or an increase to other comprehensive income. Conversely for decreases: An asset is decreased with the other side of the equation being a loss on the income statement or a decrease to other comprehensive income.

Valuation adjustments are made to a company’s assets or liabilities—only where required by accounting standards—so that the accounting records reflect the current market value rather than the historical cost.

Some assets (e.g., trading securities) are shown on the balance sheet at their current market value, and changes in that market value are reported in the income statement.

Some assets are shown at their historical cost (e.g., specific classes of investment securities being held to maturity).

Some assets (e.g., a particular class of investment securities) are shown on the balance sheet at their current market value, but changes in market value bypass the income statement and are recorded directly into shareholders’ equity under a component referred to as “other comprehensive income.”

Where valuation adjustment entries are required for assets, the basic pattern is the following for increases in assets:

An asset is increased with the other side of the equation being a gain on the income statement or an increase to other comprehensive income.

An asset is decreased: An asset is decreased with the other side of the equation being a loss on the income statement or a decrease to other comprehensive income.

• A journal is a document or computer file in which business transactions are recorded in the order in which they occur (chronological order). The general journal is the collection of all business transactions in an accounting system sorted by date. All accounting systems have a general journal to record all transactions. Some accounting systems also include special journals. For example, there may be one journal for recording sales transactions and another for recording inventory purchases.

• Journal entries—recorded in journals—are dated, show the accounts affected, and the amounts. If necessary, the entry will include an explanation of the transaction and documented authorization to record the entry. As the initial step in converting business transactions into financial information, the journal entry is useful for obtaining detailed information regarding a particular transaction.

• Adjusting journal entries, a subset of journal entries, are typically made at the end of an accounting period to record items such as accruals that are not yet reflected in the accounting system.

A journal is a document or computer file in which business transactions are recorded in the order in which they occur (chronological order). The general journal is the collection of all business transactions in an accounting system sorted by date. All accounting systems have a general journal to record all transactions. Some accounting systems also include special journals. For example, there may be one journal for recording sales transactions and another for recording inventory purchases.