2.20 - Today's Topic Financial Accounting Information...

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Today’s Topic PLEASE TURN OFF CELL PHONES Financial Accounting Information System This class will describe GAAP for: Balance Sheet: Note Payable, Interest Payable  Income Statement: Interest Expense Statement of Cash Flow effect
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Fig 110 Debt v. Equity Debt Equity Purpose Borrow and Repay Sell ownership Other Entity Lender Stockholder Cost to Business Interest due over time Dividend when declared Benefit to Other Entity Interest earned over time Increase in value plus dividend
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Fig 111 Debt Terminology Principal The amount borrowed and still owed to lender. Interest The cost of borrowing, computed as follows: x x (Time = % of year)
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Fig 112 Note Payable Recognition When note is signed Valuation (Measurement) Amount owed Presentation Listed after Accounts Payable in the Current Liability section of the Balance Sheet if due in one year Listed in the Long-Term Liability section of the Balance Sheet if long-term
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On September 1, 2006, Conner borrowed $90,000  cash from First City Bank by issuing a 1 year note at  9% interest.  1. Increase assets (cash). 2. Increase liabilities  (notes payable). Asset Source 
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2.20 - Today's Topic Financial Accounting Information...

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