august_29_slides_chap_one - ORIE 350 Financial and...

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    ORIE 350 Financial and Managerial  Accounting Lecture #2 August 29, 2006
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    NOTES 1. Homework #1 due one week from today has been posted. Look it over if you have not already done so. 2. Section times and TA office hours are also posted. Monday sections start at 2:55 PM! 3. If you added the class during add/drop, please be sure you are entered on the Blackboard Web site for this class.
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    Activities of a Business I. Financing Acquisition of capital (money) Sources are Investors (stockholders) Creditors (lenders) The business itself (retained earnings)
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    Activities of a Business Money owed to creditors is kept track in accounts known as liabilities , with names such as “accounts payable” and “bank loan payable.” Money received by selling shares of stock is kept track of in accounts known as stockholder’s equity , with names such as “common stock.”
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    Activities of a Business II. Investing Acquisition of fixed (long-term) assets Examples are Land Equipment Buildings Vehicles
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    Activities of a Business III. Operating Day to day operation of the business. Sell products or services Buy materials and supplies Pay employees Meet other operating expenses involved in production of goods and services
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    Activities of a Business When the products are sold, revenues are generated. Revenue is used to: Pay off loans Pay taxes Buy new materials, equipment. Distribute to the owners a return on their investment
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    Activities of a Business To create and sell the products, expenses were incurred as well. Expenses are: Employee wages Rent Cost of raw material and supplies Taxes Depreciation Interest on loans
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    Accounting Equation Assets = Liabilities + Stockholder’s Equity A = L + SE Assets: economic resources of the firm Liabilities: financial obligations to non-owners Stockholder’s Equity: a. Contributed capital: represents owner’s investments b. Retained earnings: represents accumulated profits and losses from past years.
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august_29_slides_chap_one - ORIE 350 Financial and...

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