lec02 - Slide 1 Slide 1 Chapter 2: Investing and Financing...

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Unformatted text preview: Slide 1 Slide 1 Chapter 2: Investing and Financing Decisions and the Balance Sheet Slide 2 Slide 2 Learning Objectives 1. The Conceptual Framework of Accounting 2. Identify what constitutes a business transaction and identify common balance sheet account titles used in business. 3. Apply transaction analysis to simple business transactions in terms of the accounting model Assets = Liabilities + Stockholders' Equity. 4. Determine the impact of business transactions on the balance sheet using two basic tools, journal entries and T-accounts. Slide 3 Slide 3 The Conceptual Framework Qualitative Characteristics Relevancy Reliability Comparability Consistency Elements of Statements Asset Liability Stockholders Equity Revenue Expense Objective of Financial Reporting To provide useful economic information to external users for decision making and for assessing future cash flows. Slide 4 Slide 4 Elements of Statements Asset Liability Stockholders Equity Revenue Expense Gain The Conceptual Framework Qualitative Characteristics Relevancy Reliability Comparability Consistency Objective of Financial Reporting To provide useful economic information to external users for decision making and for assessing future cash flows. Primary Characteristics Relevancy: predictive value, feedback value, and timeliness. Reliability: verifiability, representational faithfulness, and neutrality. Secondary Characteristics Comparability: across Slide 5 Slide 5 Qualitative Characteristics Relevancy Reliability Comparable Consistent The Conceptual Framework Elements of Statements Asset Liability Stockholders Equity Revenue Expense Gain Objective of Financial Reporting To provide useful economic information to external users for decision making and for assessing future cash flows. Asset: economic resource with probable future benefits. Liability: probable future sacrifices of economic resources. Stockholders Equity: financing provided by owners and operations. Revenue: increase in assets or settlement of liabilities from ongoing operations. Expense: decrease in assets or increase in liabilities from ongoing operations. Gain: increase in assets or settlement of liabilities from peripheral activities. Slide 6 Slide 6 The Conceptual Framework Assumptions 1. Separate entity: Activities of the business are separate from activities of owners. 2. Continuity: The entity will not go out of business in the near future....
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lec02 - Slide 1 Slide 1 Chapter 2: Investing and Financing...

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