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Financial Accounting Chapter 2

Financial Accounting Chapter 2 - Chapter 2 Investing...

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Chapter 2: Investing, Financing Decisions, and the Balance Sheet I. Objective of External Financial Reporting Provide useful economic information to external users for decision making Information must be relevant, reliable, comparable, and consistent II. Types of Accounts (Refer to Pg 54) 1. Assets (Order of Liquidity how soon the asset can be turned into cash) Current Assets assets that will be used and turned into cash within one year (Inventory) 2. Liabilities (Order of Maturity how soon the liability can be paid) Current Liabilities obligations that will be settled by providing assets within one year 3. Stockholder’s Equity financing provided by the shareholders Contributed Capital results from owners providing cash to the business Retained Earnings (Whatever isn’t RE, is deducted in the form of dividends or capital gains ) III. Transactions exchange of goods or services by one party for assets, services or promises to pay liabilities by one or more partners 1. Transaction Analysis
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