08 SM121 Accounting 2 2008 Bal Sheet post after

08 SM121 Accounting 2 2008 Bal Sheet post after - Financial...

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l Click to edit Master subtitle style l Financial Statements 2 Learn Harder
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l Last week… Ø Balance Sheet: Financial condition at a point in time Ø Income Statement and Cash Flow Statement: Financial performance over a period of time Ø Accrual vs. Cash Accounting Ø Financial statements are based on VALUE TRANSACTIONS, not cash exchanges
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l Today… § Focus on Balance Sheet § What do all the numbers mean?? § Where do the numbers come from??
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l 10/6/09SM 121 Fall 2006 l Weil Gotshal l Business Balance Sheet Business balance sheet shows the results of all the investing and financing activities up to a specific point in time Assets: economic resources of a business that are expected to be used in future operations Liabilities: obligations of the business (monetary or nonmonetary) to non-owners Stockholders’ Equity: claims of the owners after creditor claims. Assets = Liabilities + Equity
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l 10/6/09SM 121 Fall 2006 l Weil Gotshal l The Balance Sheet Equation What you own = How you paid for it Assets = Liabilities + Equity Investments in Non-owner Owner the business financing financing $$ Borrowed by the company $$ Invested by owners or $$ Earned by the company Stuff Purchased by the company
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l OK, but… How do you keep track of all this?? Where do the numbers come from??
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l Tracking Business Activities Supercuts Events to get your Supercuts hair salon up and running: Select a rental location Renovate the space Buy furniture and salon equipment Buy a computer and software Buy shampoos and the like Your parents contribute $50,000 to start-up costs. You get a $20,000 loan from a bank to cover the rest of the costs.
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Assets = Liabilities + Stockholders' Equity Two simple ideas are used when analyzing transactions: Duality of Effects Every transaction has at least two effects on the basic accounting equation. A = L+ SE The Universe MUST stay in balance after we have tracked the transaction Transaction Analysis tracks all the financial events of the business so we have the data to produce financial statements
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l Analyzing Transactions—Examples Purchased hair spray supplies for cash
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08 SM121 Accounting 2 2008 Bal Sheet post after - Financial...

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