The Ninth Message

Dear Yas,

We learned about the three required financial statements under US

GAAP. These statements are:

1. the balance sheet,

2. the income statement and

3. the statement of cash flows.

The balance sheet gives us a financial picture of the company on the

last day of the period. The balance sheet:

1. tells us what assets the company has,

2. divides assets into categories such as current and long-term,

3. tells us what liabilities the company has,

4. classifies liabilities as current and long-term,

5. shows the value of the owners' interest in the company. This is

called "owners' equity."

The income statement tells us the financial outcome of the main

business of the company for one entire period. The income statement

reports:

1. the gross income,

2. the costs of doing business in that period and

3. the net income or loss for the period.

The costs of doing business are classified as "cost of goods sold" and

"operating expenses."

The income statement and balance sheet are related. The net income

from the income statement is included in the owners' equity section of the

balance sheet. The income statement and the balance sheet use the accrual

method.

Cash is the most important asset of a company. It is helpful to know

the following about cash:

1. How much was received during the period?

2. What did the company do to get the cash?

3. How much was spent during the period?

4. What did the company get for the cash it spent?

These questions are answered in the cash flows statement. Japanese

GAAP does not require a formal statement of cash flows. The US cash flow

statement uses the cash basis, not the accrual basis of accounting.

We went to several web sites to see the financial statements of

several U.S. companies. Some of the companies were large. Some were

small.

We looked at depreciation briefly. We went to one English language

web site that explained Japanese depreciation. Both the US and Japan use

depreciation to match revenues and expenses.

We learned that the role of CPAs is different in the two countries.

CPAs in the US do the work of CPAs and licensed tax accountants in Japan.

There are many individual investors in the market in the US. Individuals

demand much information so they can make a good investment decision. CPAs

in Japan mainly provide information for banks, not individual investors.

We looked at one or two differences in the Securities and Exchange

Commissions in the two countries. In the US, the SEC has much power to

regulate a very active market. Finally, we looked at the web sites of the

6 biggest accounting firms in the US. This helped us see how important

technology is today and how much technology will influence accounting

tomorrow.

I have learned much from our correspondence. I hope you have learned

much, too. If you ever visit the US, I hope you come to the East Coast.

We would love to see you! Good luck in your studies.

Merry Christmas and Sayonara!

Sincerely,