McDonald's Financial Accounting Essay Example | Topics and Well Written Essays - 1500 words

McDonald's Financial Accounting - Essay Example McDonald’s was formed in 1940 as a barbeque restaurant but later developed into a huge chain of hamburger fast food restaurants. â€Å"McDonald's is the leading global foodservice retailer with more than 33,000 local restaurants serving more than  64 million people in 119 countries each day. More than 80% of McDonald's restaurants worldwide are owned and operated by independent local men and women† (About McDonald’s.com, 2011). The accountant’s report accompanying the Annual Report usually refers to the auditor’s report. The purpose of the accountant’s report is to give an opinion on the presentation of the financial performance of the organization. The auditors review the entire financial data before forming an opinion on the financial statements of an organization. The accountant’s report of McDonald’s is reviewed by the Ernst and Young, who are a Public Accounting firm and are the auditors of McDonald’s. According to them, the financial statements of McDonald’s seem to be fairly presented in all material respect and that the financial statements are prepared in accordance with the U.S Generally Accepted Accounting Principle. The main idea or the main purpose of this report is to assure the shareholders and the investors that the company in question is not performing any fraudulent activity that may not be in line with their respective objectives (McDonald’s, 2010) Financial Statements are a proper record of financial performance of any given business entity. These financial statements provide a reflection of an organization’s performance with respect to the resources being used in order to attain the favorable/unfavorable results. The most important financial statements are: Income Statement The income statement displays the net profit or loss made by a company through the normal course of its operation. The profit or loss reported within the Income statement pertains to a specific period of time (usually 12 months which constitutes a year end). The only transactions recorded within the Income Statement are those which affect the profit. These transaction normally tend to be affiliated with the income earned and the expenditure incurred during a period of time. The Consolidated Income Statement of McDonald’s shows a profit of $4946.3 million in the year ending 2010. This profit figure is 8.6% and 14% higher than the profit figures of 2009 and 2008 respectively. These figures clearly suggest that McDonald’s has performed extensively well; keeping in mind the global economic crisis that had prevailed within the global economy(McCallig, 2008). Balance Sheet The Balance Sheet is a statement that portrays the result at any particular point in time. The Balance Sheet provides a snap shot of the entire business in question since its inception till the point in time when the Balance Sheet is created. The Balance Sheet is categorized into broader categories showing the assets, liabilities and the equity of a business entity. These categories are shown separately with the assets portion under one heading while the equity and liabilities portion under the other heading. The assets portion must eventually tie up with the amount displayed under the equity and li