CH 1

Org. Forms

1. Sole Prop

2. Partnership

3. Corp

4. Others (LLC)

Accounting - A system of A, R, & S. Results of B A. Reporting to D M.

1. Analyzing, recording, summarizing

2. Business activities

3. Decision makers

4 major external users

1. creditors

2. Investors

3. directors

4. gov't

Goal of Acct

useful info

Basic Acct Equation

A = L + SE

Assets

1. Cash

2. A/R

3. Inv

4. Equip

5. More to come

Liability

1. AP

2. NP

3. more to come

Stockholders’ equity

1. CS - common stock

2. RE - retained earnings

3. more to come (ChIl)

Net income is not ___.
Expenses all ___.
Div is not an ____.

1. Cash

2. Cost

3. Expense

Dividends

1. Often paid in cash

2. Optional

3. Declared by Board

4. Not an expense!

4 FS (Order + Formulas)

1. I/S (NI=R-E)

2. SRE (ERE= BRE ± NI-Div.)

3. BS (A=L+SE)

4. SCF (± 0. ± I ± F)

IS
R-E=NI

Income Statement

Revenue - Expenses = Net Income for a period of time

SRE

ERE= BRE ± NI-Div.

Statement of Retained Earning Period of time

Ending Retained Earnings = Beginning Retained Earning ± Net income - Dividends

SCF Categories

Statement of Cash Flows (f/a period)

± Operating ± Investing ± Financing

Receivable is an

asset

Payable is a

liability

1. GAAP

2. FASB

3. IFRS

1. Generally Accepted Accounting Principles

2. Financial Accounting Standard Board

3. International Financial Reporting Standards

A/R

Accounts Receivable

Amount owed to business by customers for past transaction(s)

We focus on accounting from a

corporate standpoint

cost principle

Assets are initially reported on the B/S on their original cost to the company

Separate Entity Assumption

Financial results of a business includes the results of business only