Chapter 2 Comments 8th ed

Chapter 2 Comments 8th ed - Instructor Comments Chapter Two...

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Instructor Comments Chapter Two This is an important Chapter for you . Chapter 2 provides an introduction to the basic forms of business organization (page 32) and to the four basic financial statements: The balance sheet (page 33), The income statement (page 36), The statement of changes in owners’ equity (page 38), and The cash flow statement (page 39) It is absolutely vital that you understand these four financial statements , and how they relate to each other. In future chapters, we will expand and explore these statements in depth. The balance sheet is a statement that measures the financial position of a business at a given point in time . You should clearly understand the format, the accounts, and the terms in the balance sheet. Note the income statement on page 36. It shows the revenues that have been earned and the expenses that have been incurred to generate that revenue during a given period of time . Again, you should clearly understand the format, the accounts, and the terms in the income statement; in particular, the concepts of Gross Profit and Income from Operations. On the statement of changes in owners’ equity (page 38), note that net income is added to retained earnings (and dividends are Page 1 of 5
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subtracted) in order to find the ending owner's equity of $203,000, which appears on the balance sheet. Also, this chapter exposes you to new terminology that you must
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Chapter 2 Comments 8th ed - Instructor Comments Chapter Two...

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