Accounting concepts notes - What is accounting In the...

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What is accounting? In the simplest term, accounting is a system that provides quantitative information to people for decision-making. Financial accounting is concerned with providing relevant financial information to various external users, e.g. investors, creditors. What is a corporation? A corporation is a business created as a distinct legal entity owned by one or more individuals. Corporation Assets = Liabilities + Owners’ Equity Assets - Items that have probable future benefits and are owned and control by the company - Separated into current, and long-term - Examples: cash, inventory, machinery, equipment, land Liabilities - Obligations that the company has to pay in the future - Separated into current and long-term
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Unformatted text preview: - Examples: bank loans, bonds Owners’ Equity- Shareholders’ claim of the company- Examples: share capital, retained earnings Income statement Revenues – Expenses = Net Income Revenues- Amounts earned by the company from the sale of goods and/or services- Increase in stockholders’ wealth- Not the same as cash receipts Expenses- Resources used in the production of revenues- Decrease in stockholders’ wealth- Not the same as cash disbursements Retained Earnings Retained Earnings at Beginning of Year + Net Income for the Year - Dividends Declared during the Year = Retained Earnings at End of Year The accounting equation Assets = Liabilities + Owners’ Equity...
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  • Fall '14
  • Wang
  • Accounting, Balance Sheet, Generally Accepted Accounting Principles, Owners’ Equity, relevant financial information, distinct legal entity, various external users

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