Chapter_1-first_few_pages

Chapter_1-first_few_pages - 23 CH 1-INTRODUCTION TO...

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CH 1-INTRODUCTION TO FINANCIAL ACCOUNTING Accounting is the language of business. You have decided to start a business—“MSU-T-shirts”, by renting a small shop on Grand River. You have saved $5,000 for the start-up, and have been able to borrow $14,000 from your father. Your monthly rent payment, paid at the beginning of each month, will be $1,500. You have also decided to hire a helper, paying $400 per week (pay each Friday) for 4 weeks work each month. Your utility bill received at the end of the first month was for $300. You will pay this next month. Your initial order of merchandise, which you had to pay cash on delivery, is: 200 Spartan green T’s, each $6 300 Spartan white T’s, each $5 500 Embroidered T’s, each $8 During the month you sold 120 green T’s, each at $10 all cash received 200 white T’s, each at $8 (customer promised to pay you later for these) 250 Embroidered T’s, each at $15 all cash received At the end of the month: How much cash do you have left? How well did you do the first month in business? What is you financial position at the end of the month? 23
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1) Owners of the company Company ownership is generally exhibited as one of three types: a) Sole proprietorship- i) Single person owns the business ii) Owner is responsible for taxes and debts. b) Partnership i) Two or more individuals own the business ii) Owners are responsible for taxes and debts. c) Corporations-main type we will talk about in this course i) Potentially many owners with ownership exhibited via share of capital stock ii) Owners are referred to as shareholders, stockholders, or investors iii) Separate legal entities from the owners. 2) Debtholders (Creditors)—Capital (money) is also borrowed from creditors— often in loans from banks or by issuing bonds to the public. Notes-a loan of money supported by a formal written document Bond—a security representing money borrowed by a corporation from the public. Requires payment of periodic interest and repayment of the principal at a specified
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Chapter_1-first_few_pages - 23 CH 1-INTRODUCTION TO...

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