Mod 3 Lect 4 - Spring 2011 Module 3 Accounting & Finance...

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David Robinson © D. Robinson, 2010 Spring 2011 Module 3 Accounting & Finance Lecture 4: Balance Sheet
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Accounting & Finance Accounting Finance Managerial Financial Auditing How investors use their money How firms raise money Three financial statements Forms of business Income St. Balance Sheet St. Cash Flows
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2 Financial Accounting II Double Entry Bookkeeping Fundamental Accounting Equation Balance Sheet
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How Much is our Simple T-Shirt Business Worth? We paid $90 for the screens last year We begin this month with $1,200 Buy 100 t-shirts for $9 $900 Cash we have left: $300 Is our “firm” only worth $300?
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How Much is our Simple T-Shirt Business Worth? We paid $90 for the screens last year We begin this month with $1,200 Buy 100 t-shirts for $9 $900 Cash we have left: $300 Is our “firm” only worth $300? No. We still have $900 inventory
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At the beginning of the month: We paid $90 for the screens last year We begin this month with $1,200 cash Value of our firm is $1,200
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Later on in the month: We paid $90 for the screens last year We now have $ 300 cash and Inventory of $ 900 Value of our firm is still $1,200
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Double Entry Bookkeeping Keeping the books “in balance” shows good record keeping
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Double Entry Bookkeeping A system in which each transaction results in two entries A system of debits and credits in which the Accounting Equation must always remain in balance
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Example: Double Entry Bookkeeping We have $1,200 in Cash, and buy 100 t-shirts at $9each Cash goes down by $900 … Inventory goes up by $900 The two entries “Inventory” is an account
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Simple T-Shirt Balance Sheet: Assets Cash $ 300 t-shirts (inventory)$ 900 Assets are: $ 1,200
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22 Format for the Balance Sheet “The Fundamental Accounting Equation” Assets = Liabilities + Owners’ Equity ALE
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This note was uploaded on 04/13/2011 for the course UGBA 10 taught by Professor Xuanmingsu during the Spring '08 term at University of California, Berkeley.

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Mod 3 Lect 4 - Spring 2011 Module 3 Accounting & Finance...

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