Module 1 Notes.pdf - Accounting equation Assets = Liabilities Equity Retained Earnings Net Income-Dividend=Retained Earnings The equity ratio is the

Module 1 Notes.pdf - Accounting equation Assets =...

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Accounting equation: Assets = Liabilities + Equity Retained Earnings: Net Income-Dividend=Retained Earnings The equity ratio is the stockholders’ equity divided by total equity. The income statement shows the profitability of the company and is dated as ending in a certain period. Retained earnings represent undistributed net income. The equity ratio shows the proportion of the company's assets that is financed through investments by the owners. The three types of business activity are service, merchandising, and manufacturing. Define accounting. Accounting information is used in making decisions about how to allocate scarce resources. Although accountants place much emphasis on reporting what has already occurred, this past information is intended to be useful in making economic decisions about the future. Describe the functions performed by accountants. Accountants provide reporting on past events in order to give insight into the health and function of a company. Accountants report on economic events (or business activity) by preparing financial statements and special reports. Often accountants interpret these statements and reports for various groups such as management, investors, and creditors. Interpretation may involve determining how the business is performing compared to prior years and other similar businesses. Differentiate between financial and managerial accounting. Financial accounting is for both internal and external use, is done annually and quarterly, and is made to provide general information about the overall heath of a company. Managerial account is for internal users, done as needed, for specific

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