Accounting 201 Textbook Notes

Accounting 201 Textbook Notes - Chapter 1 9/1...

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Chapter 1 9/1 Owner-Managers – Founders functioning as managers of a business Creditor – Largest lender (American Bank to Maxidrive) Investors – Group of wealthy people that buy companies (Exeter Investors buying Maxidrive) Manager – Runs the company Dividends – What investors hope to receive (a portion) of what the company earns in the form of cash payments Eventually sell their share of the company at a higher price than what they paid Financing Activities – Exchanges money with its lenders and owners Investing Activities – Buy or sell items 3used in producing a product (Maxidrive buying equipment/plant to produce disk drives) Operating Activities – From whom the company buys or sells its product/ items needed to build the product (Suppliers/Customers) Suppliers – From whom a company buys certain products/items (Motors for Maxidrive disk drives/Maxidrive is a supplier of Dell/Apple) Customers – From whom a company sells its product to (Dell/Apple are customers of Maxidrive) Accounting – A system that collects and processes (analyzes, measures, and records) financial information about an organization and reports that information to decision makers Internal Decision Makers – Use these accounting reports, often the managers of a company (Maxidrive managers) External Decision Makers – Use these accounting reports, often the outside parties of that company (Exeter Investors and American Bank) Financial Accounting Reports – Periodic financial statements and related disclosures Managerial Accounting Reports – Detailed plans and continues performance reports (day-to-day operations of a company) Elements – Categories of items reported on each of the four statements Relationships – How many elements within a statement related Importance – Why are these elements important to owners’/creditors’ decisions 9/3 The Four Basic Financial Statements Summarizes the financial activities of the business Quarterly Reports – End of each quarter Annual Reports – End of each year o Balance Sheet – A report (statement) of the financial position (amount of assets, liabilities, and stockholders’ equity) of an accounting entity at a point in time Heading includes four significant items
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Name of the entity (Maxidrive Corp.) Title of the statement (Balance Sheet) Specific date of the statement (At Dec. 31, 2006) Unit of measure (in thousands of dollars) o Accounting Entity – The organization for which financial data are to be collected On balance sheet, the entities, not owners, are viewed to own all the resources, debts, etc. o
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Accounting 201 Textbook Notes - Chapter 1 9/1...

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