Financial Statements

Financial Statements - Financial Statements 1 Define the...

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Financial Statements 1
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Define the Following GAAP FASB SEC IASB Double entry bookkeeping Accrual accounting Public corporation Form 10k 2
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Financial Statements Income statement Balance sheet Statement of shareholders’ equity Statement of cash flows Which of the above statements is considered to be permanent? Temporary? 3
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The Accounting Identity Assets = Liabilities + Equity The balance sheet always has to balance If the left side of the balance sheet increases (decreases), then the right side must increase (decrease) by the exact same amount Owners (also called residual claimants) get whatever is left over after creditors have been paid: Equity = Assets – Liabilities Can equity ever be negative? 4
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The Accounting Cycle 1. Recording transactions 2. Recording adjusting entries 3. Preparing the financial statements 5
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Recording Transactions Internal or external event that causes a change in a company’s assets, liabilities, or stockholders’ equity Recorded in a journal (journal entry) Posted to general ledger accounts Double-entry system Debit : left side of an account Credit : right side of an account Debits = Credits 6
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Debits and Credits A debit increases an asset or reduces a liability A credit increases a liability or reduces an asset Since the balance sheet must always balance, every debit has to have an offsetting credit Some examples A bank loan is repaid A credit sale is collected Why is a check card often called a debit card? If you return an item, purchased with a credit card, why do you get a credit on your account? 7
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Accounting System Components Permanent Temporary Account types Assets Liabilities Equity Revenues, Gains Expenses, Losses Dividends Balances Carry forward to the next fiscal period Closed to retained earnings at year- end Represent the accounting equation 8
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Recording Adjusting Entries Required by the accrual basis of accounting
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This note was uploaded on 10/14/2011 for the course WCOB 2043 taught by Professor Staff during the Fall '08 term at Arkansas.

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Financial Statements - Financial Statements 1 Define the...

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