Chapter 1 - Chapter 1 Accounting a system that collects and...

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Chapter 1 Accounting: a system that collects and processes (analyzes, measures, and records) financial information about an organization and reports that information to decision makers Accounting system --financial accounting reports--external decision makers--creditors, investors suppliers and customers ---- managerial accounting reports---internal decision makers----managers Four basic financial statements: balance sheet, income statement, statement of retained earnings, statement of cash flows Balance sheet: reports the amount of assets, liabilities, and stockholder’s equity of an accounting entity at a point in time . Structure: for all financial statements Heading Name of entity Title of statement Specific date of the statement Unit of measure Accounting entity: the organization for which financial dates are to be collected Maxidrive Corp. Balance Sheet At December 31, 2009 (in thousands of dollars) Assets Cash Accounts Receivable Inventories Plant and Equipment Land Total Assets Liabilities Accounts payable Notes Payable Total Liabilities Stockholder’s Equity Contributed Capital Retained Earnings
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Total Stockholder’s Equity Total Liabilities and Stockholder’s Equity Basic Accounting Equation: Assets= Liabilities+ Stockholder’s Equity Economic Resources Sources of financing for economic resources (e.g. cash, inventory) Liabilities: from creditors Stockholder’s Equity : from stockholders Assets: economic resources owned by the company Liabilities: company’s debts or obligations Stockholder’s equity: the amount of financing provided by owners of business and earnings Income Statement: (aka. statement of operations)reports the revenues less the expenses of the accounting period Structure:
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