Chapter 1 Lecture 1

Chapter 1 Lecture 1 - 1 ACIS 2115 Chapter One Business...

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Unformatted text preview: 1 ACIS 2115 Chapter One Business Decisions and Financial Accounting 1-2 Organizational Forms Partnership Owned by two or more people. Each partner is personally liable for all debts of the business. Corporation A separate entity from both a legal and accounting perspective. Owners of corporations (stockholders) are not personally responsible for debts of the corporation. Sole Proprietorship Owned by one person. Owner is personally liable for all debts of the business. 1-3 Organizational Forms Corporations Public Companies Have their stock bought and sold on stock exchanges. Private Companies Have their stock bought and sold privately. 1-4 The Accounting System Accounting is an information system designed to analyze, record, and summarize business activities and then report the results to decision makers, both inside and outside the organization. 1-5 Accounting for Business Decisions Accounting System Financial Accounting Reports Managerial Accounting Reports External Users Creditors Investors Others Internal Users Managers Produces Provided to ACIS 2115 ACIS 2116 1-6 The Basic Accounting Equation Resources Owned . . . by the company Resources Owed . . . to creditors to stockholders Separate Entity Assumption Requires that a businesss financial reports include only the activities of the business and not those of its stockholders. 1-7 Assets Resources controlled by the company that have measurable value and are expected to provide future benefits to the company. Cash Supplies Furniture Equipment 1-8 Liabilities Amounts owed by the business to creditors. Notes Payable Accounts Payable 1-9 Stockholders Equity Owners claim to the business resources. Stock Certificate 1-10 Revenues, Expenses and Net Income Revenues Sales of goods or services to customers. They are measured at the amount the business charges the customer. Expenses The costs of business necessary to earn revenues, including wages to employees, advertising, insurance, and utilities. 1-11 Dividends Payments a company periodically makes to its stockholders as a return on their investment. Dividends are not expenses. 1-12 4 Basic Financial Statements Balance Sheet Income Statement Statement of Retained Earnings Statement of Cash Flows 1-13 An Example - Hokie Car Wash Suppose that you decide to wash cars in the parking lot of a shopping center. Ten of your friends contribute $25 each to your car wash. You give your friends a certificate stating that they have an ownership interest in the car wash. You are not required to pay your friends back the $25. However, if the car wash is profitable and you have enough cash, you will pay them dividends. 1-14 Financial Statement Equations Assets = Liabilities + Owners Equity Balance Sheet: $250 = $250 Cash Contributed Capital 1-15 Hokie Car Wash Suppose you borrow $200 from your parents for your car wash. You promise to pay your parents back....
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This note was uploaded on 12/06/2011 for the course ACIS 2115 taught by Professor Jayardley during the Fall '07 term at Virginia Tech.

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Chapter 1 Lecture 1 - 1 ACIS 2115 Chapter One Business...

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