Lecture #3 - BUS 210 Financial Accounting Lecture#3...

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May 12, 2009 Demerjian 1 BUS 210 Financial Accounting Lecture #3 September 4, 2008
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May 12, 2009 Demerjian 2 Recapitulation- Chapter 2 There are four major financial statements. The balance sheet equation. The retained earnings equation.
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May 12, 2009 Demerjian 3 Moving Forward… Chapter 4 The Balance Sheet (Fundamental Accounting)  Equation and “spreadsheet” accounting Journal Entries and T-Accounts Financial Statements
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May 12, 2009 Demerjian 4 Objectives Interpret the underlying economics of a list  of transactions. Be able to journal transactions. Move from journal entries to T-Accounts. Close out income statement accounts to  retained earnings. Create financial statements from T- Accounts.
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May 12, 2009 Demerjian 5 Balance Sheet Equation Assets = Liabilities + Shareholders’      Equity Expanded: Assets = Liabilities + Contributed  Capital + Retained Earnings
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May 12, 2009 Demerjian 6 Pacioli (1445-1514)
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May 12, 2009 Demerjian 7 Double-Entry Accounting Every transaction affects  at least  two  accounts. We will start out assuming  only  two  accounts are affected. These two accounts must balance the  balance sheet equation.
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May 12, 2009 Demerjian 8 Double-Entry Accounting One of the following must happen: 1. Increase Asset, Increase Equity  Capital contribution 1. Decrease Asset, Decrease Equity Dividend 1. Increase Asset, Increase Liability Assume debt 1. Decrease Asset, Decrease Liability Pay off wage payable
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