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ACCT-2001-AUG.-28 - Cash is liability Investor bought...

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ACCT: Aug. 28 A=L+E I. E=Equity (ownership) A. Paid-in B. Retained Earnings- basically where all your profits are stored i. Revenues= Money made ii. Expenses= Money spent Revenues-Expenses=Profit/Net Income C. Dividends- When a business shares its profits with the owners i. Something outside of what you normally pay yourself when business does well ii. (^^ All of which effect Equity) EXAMPLE: a. Revenue= Equity goes up (when making money)/ Retained earnings goes up b. Expenses= Equity goes down (When losing money)/ Retained earnings goes down c. Dividends= Equity goes down / Retained earnings goes down *Dividends are NOT included when calculating net income (R (a)-E (b) =Net Income) II. Assets = Liability + Equity A. Liability claims an asset (outside) B. Equity claims an asset (inside) i. EXAMPLE: Closing business has 1,000,000 and owes 2,000,000 1,000,000 = 2,000,000 + 8,000,000 (pay off people on outside then inside, business goes home owner is left with rest after business closes) ii. EXAMPLE: Someone purchases stock in a company for 10,000 cash.
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Unformatted text preview: Cash is liability. Investor bought ownership in the company. 10,000 (cash) = L + 10,000 III. Financial Statements A. Income Statement i. Performance over a range of time (month/quarter/year) ii. Revenues (add up all) – Expenses (add up all)= Net Income or Net Loss B. Statement of Retained Earnings i. Beginning Balance (how much money you start with)+Net Income or –Net Loss (used from previous equation) - Dividends= New Retained Earnings C. Balance Sheet i. Used to determine what financial position is ii. Assets = Liabilities + Equity a. Assets= Cash, Accounts Receivable, Equipment, Delivery truck, etc. b. Liability= Earned Revenue, Accounts Payable, etc. c. Equity= Paid-in and Retained Earnings (used from previous equation)-On Retained Earnings NEVER list Revenues, Expenses, or Dividends: they are already represented in Retained Earnings in previous equation D. Statement of Cash Flow...
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ACCT-2001-AUG.-28 - Cash is liability Investor bought...

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