Chapter 1 - Intro to financial accounting

R.O.C.K.

Record, Organize, Calculate, Keep Track

Sole Proprietorship

A type of business entity owned and operated by a single individual, who is personally liable for all debts and obligations of the business.

Partnership

A business entity where two or more individuals share ownership, responsibilities, and profits. Each partner is personally liable for the debts and obligations of the partnership.

Corporation

A legal entity created by individuals, shareholders, or other entities, recognized by law as separate from its owners. Corporations provide limited liability protection to their owners and can raise capital through the sale of shares.

Financing

Investing

Operating

Revenue and Expense

Always of the balance sheet

Unqualified

Pass

Qualified

Pass with a ‘but‘

Adverse

Fail

Disclaimer

No Opinion

10 → K

Annual Report filed with SEC

SEC

Securities and Exchange Commission

Assets

Assets are items of economic value owned or controlled by an individual, business, or entity that can be converted into cash or provide future financial benefits.

Liabilities

Liabilities are financial debts or obligations that an individual or business owes to outside parties. They represent claims against assets and require future settlement, typically through the payout of cash, transfer of assets, or provision of services.

Dividends

The portion of the companies net income paid to its stockholders

Big 4

KPMG, PWC, EY, Deloitte

Income Statement

Balance Sheet

Statement of Retained Earnings

Who uses information from sheets?

Management, Investors, Creditors, Regulators

F/S

Financial Statement

CAMs

Critical Audit Matters