Class_3_Balance_Sheet_(2)_Upload

Class_3_Balance_Sheet_(2)_Upload - Intro to Accounting &...

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W2261/4261 Zhang                                    Int 1 Intro to Accounting & Finance W2261/4261 Columbia University Lecture 3 Jan 23, 2007
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W2261/4261 Zhang                                    In 2 Review of Last Class 1. Accounting Equation 2. The accounting concepts of assets, liabilities, and shareholders’ equity, 3. Recognition, valuation, and classification issues 4. GAAP
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W2261/4261 Zhang                                    In 3 Recall Example 5 in Last Class Example 5. In Example 4, suppose at the time the contract is signed, $15,000 was advanced. The contract was partially executed. Trucks are NOT assets. The $15,000: Seller: an increase in Cash (asset) and an increase in Advances from Customers (liability). Buyer: an decrease in Cash (asset) and an increase in Advances to Suppliers (asset)
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W2261/4261 Zhang                                    In 4 In Today’s Class: 1. The dual-entry recording framework. 2. Preparing a Balance Sheet
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W2261/4261 Zhang                                    In 5 Dual-Entry Recording Framework Every economic event has two sides, a give and a take. Accountants record both sides of some economic events as a transaction. Furthermore, accountants require that the two sides of a transaction balance so that the basic accounting equation remains in balance.
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W2261/4261 Zhang                                    In 6 Dual Effect of a Transaction Recall the basic accounting equation Assets = Liabilities + Owners’ Equity Any transaction will effect one or more of the three classes of accounts. Remember: the transaction must balance the basic equation must balance. the basic rule of math: you can do whatever you want to an equation as long as you do it to both sides of the equal sign.
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W2261/4261 Zhang                                    In 7 Dual Effect of a Event Principal Financial Statements Individual Transactions and Events Accounting Systems for Accumulating Information about Transactions and Events Accountants record the effects of transactions and accumulate them for presentation in the financial statements.
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W2261/4261 Zhang                                    In 8 Effect on the Equation There are four general combinations: 1. Increase an asset and a liability or owners’ equity by the same amount, 2. Decrease an asset and a liability or owners’ equity
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This note was uploaded on 04/16/2008 for the course ECON 2261 taught by Professor Frankzu during the Spring '07 term at Columbia.

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Class_3_Balance_Sheet_(2)_Upload - Intro to Accounting &...

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