Accounting 100 Notes.docx - Accounting 100 Notes Chapter 1...

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Accounting 100 Notes Chapter 1 1. The Accounting Equation: Assets = Liabilities + Equity Assets = What you own Cash, Inventory, Furniture, Land, Buildings, Accts. Receivable, Office Supplies, Notes Receivable, Pre-Paid expenses Liabilities = What you owe Debts owed to creditors, Accts. Payable, Notes Payable, Salaries Equity = Owners Claim to assets Common Stock / Retained Earnings and assets left over after payment of liabilities Revenues – Expenses – Dividends = Equity Expenses = Rent, Salaries, Advertisements, Utilities Accounts Payable = A short term liability that will be paid in the future. Accounts Receivable = The right to receive cash in the future from customers for goods sold or services performed. Owners Capital = Owner’s contribution to the business and falls on the credit side of ledger Owner Withdrawal = Payments of equity usually cash to the owner. Not classified as an expense rather the opposite of capital. Falls on the debit side of ledger. Also decreases equity. Revenue = Earnings from goods and services Sales Revenue, Service Revenue, Rent Revenue
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Return on Assets (ROA) = Measures how profitable a company is by its withstanding assets. ROA = Net Income / Average Total Assets Average Total Assets = Beginning asset total + ending asset total / 2. Debt Ratio = Total Liabilities / Total Assets Financial Statements = Business documents that are used to communicate information needed to make business decisions. They include the income statement, statement of owner’s equity, balance sheet and statement of cash flows. - Income statement = Reports net income or net loss for a specific period of time. Revenue accounts are always listed first, followed by expense accounts from largest to smallest. Subtract expenses from revenues - Statement of Owner’s Equity = Shows the change in the owner’s capital account for a specific time period. Owner Contribution 0 Net income (transferred from income statement) X (add) Subtract Owner Withdrawals from total X (sub) Owner Capital Total for date - Balance Sheet = Reports on the assets liabilities and owner’s equity for a specific period of time. Assets should equal total liabilities and owner equity. - Statement of Cash Flows = Reports on a business cash receipts and cash payment for a specific period. (pg. 20 in text book) 2. Governing Organizations Financial Accounting Standards Board (FASB) – Private funded organization that oversees the governance of accounting standards in the United States.
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