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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.
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