Comprehensive Accounting Principles and Financial Reporting

Accounting 2301

What are the three primary types of resources or inputs?

Financial resources

Labor resources

Physical resources

Financial accounting

Targeted toward external users. This type of accounting must follow specific rules and is subject to being audited.

Manageral accountng

Targeted toward internal users. This involves reporting to the internal management themselves and does not require adherence to formal accounting rules.

What must financial accounting follow?

rules to ensure that external users, specifically investors and creditors, can rely on the provided information.

What does the Securities Exchange Commission (SEC) do?

it grants the Financial Accounting Standards Board (FASB) the authority to establish these rules ; know as GAAP

SEC

Securities Exchange commission

GAAP

Generally Accepted Accounting Principles

FASB

Financial Accounting Standards Board

Fundamental accounting equation is expressed as

Resources = Claims

Assets = Liabilities + Stockholders Equity

Assets = Liabilities + CommonStock + RetainedEarnings

Retained Earnings is defined by

Revenues - Expenses - Dividends

Stakeholders

Creditor: An individual or organization that has loaned goods or services to a business.

Investor: A Company or individual who provides assets or services in exchange for security certificates that represent ownership interests.

A Company increases its assets through three primary channels:

Borrowing from creditors, which increases Liabilities.

Receiving from investors, which increases Common Stock.

Gernating assets from operations, which increases Retained Earnings through revenues.

what happends to a company when it decreases its assets by utilizing resources in operations?

it decreases retained Earnings through expenses