Accounting Chapter 1 Part 2

Accounting Chapter 1 Part 2 - FINANCIAL ACCOUNTING CLASS...

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1 FINANCIAL ACCOUNTING CLASS NOTES FOR CHAPTER 1 Part 2 1. Financial Statements Review 2 Concepts and Principles 2. Concepts and Principles 3. Accounting standards and the accounting profession 4. Statement of retained earnings and relations between statements. 5. Demonstration example P59A 6. What to study for quiz 1 FINANCIAL STATEMENTS REVIEW • Financial Statements are prepared periodically to enable owners, investors, and creditors to evaluate financial condition and business performance condition and business performance. • These are: – The Balance Sheet – The Income Statement – The Statement of Cash Flows – The Statement of Retained Earnings or of Stockholders’ Equity (see below) The Balance Sheet • Presents the statement of financial condition of a company as of a certain date. • Assets and liabilities are presented more or less in order of liquidity – Sometimes subtotals are given for current assets and for current liabilities(assets that will be consumed sold for current liabilities(assets that will be consumed, sold or converted to cash within longer of one operating cycle or 1 year) • Stockholders’ equity is composed of paid in capital accounts and retained earnings. • Revenues, expenses, and dividends are not balance sheet accounts.
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2 Date Assets Liabilities Stockholder’s Equity July Cash Medical Supplies Land Accounts Payable Common Stock Retained Earnings Type of Transaction Painbegone Demo See Jan 20/24 class notes -1,500 31 -1,500 45,000 35,000 14,500 Bal 2,000 1,500 4,000 Assets = $49,500 Liabilities & Stockholders’ Equity = $49,500 45,000 35,000 13,000 Bal 500 1,500 4,000 Painbegone Company Balance Sheet July 31 Assets: Cash $13,000 Supplies 1,500 Current Assets $14,500 Liabilities and Equity Liabilities (all current) Accounts Payable $500 Stockholders’ equity Land 35,000 Total Assets 49,500 Paid in Capital $45,000 Retained Earnings 4,000 Total Stockholders’ Equity 49,000 Total Liabilities & Equity 49,500 Current vs. Noncurrent • In this example cash and supplies are current assets. • Other examples of current assets are accounts receivable inventories and accounts receivable, inventories and prepaid expenses. • Land, buildings, equipment, furniture etc would be examples of fixed noncurrent assets.
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3 The Income statement • Presents all revenues and expenses for (during) a period of time including income tax expense • The difference between revenues and expenses is net income. • If net income is negative this is called a net loss Date Assets Liabilities Stockholder’s Equity July Cash Medical Supplies Land Accounts Payable Common Stock Retained Earnings Type of Transaction Painbegone Demo 7,000 15-31 7,000 Revenues 45,000 35,000 10,000 Bal 2,000 2,000 Assets = $54,000 15 31 Liabilities & Stockholders’ Equity
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This note was uploaded on 02/16/2011 for the course ACCT 2331 taught by Professor Staff during the Spring '08 term at University of Houston.

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Accounting Chapter 1 Part 2 - FINANCIAL ACCOUNTING CLASS...

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