m3l6 - David Robinson D. Robinson, 2011 Fall 2011 Module 3...

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Unformatted text preview: David Robinson D. Robinson, 2011 Fall 2011 Module 3 Accounting & Finance Lecture 6: Balance Sheet Accounting & Finance Accounting Finance Managerial Financial Auditing How investors use their money How firms raise money Three financial statements Forms of business Income St. Balance Sheet St. Cash Flows 2 Financial Accounting II Double Entry Bookkeeping Fundamental Accounting Equation Balance Sheet How Much is our Simple T-Shirt Business Worth? We paid $90 for the screens last year We begin this month with $1,200 Buy 100 t-shirts for $9 $900 Cash we have left: $300 Is our firm only worth $300? How Much is our Simple T-Shirt Business Worth? We paid $90 for the screens last year We begin this month with $1,200 Buy 100 t-shirts for $9 $900 Cash we have left: $300 Is our firm only worth $300? No. We still have $900 inventory At the beginning of the month: We paid $90 for the screens last year We begin this month with $1,200 cash Value of our firm is $1,200 Later on in the month: We paid $90 for the screens last year We now have $ 300 cash and Inventory of $ 900 Value of our firm is still $1,200 Double Entry Bookkeeping Keeping the books in balance shows good record keeping Double-entry bookkeeping was developed for the Medici Sell you silk, you have to pay me later, but you owe me How do I know my managers arent stealing silk from the ware house? How do I keep track of how much money people owe me? Lorenzo the Magnificent 1449 - 1492 Double Entry Bookkeeping A system in which each transaction results in two entries A system of debits and credits in which the Accounting Equation must always remain in balance Example: Double Entry Bookkeeping We have $1,200 in Cash, and buy 100 t-shirts at $9each Cash goes down by $900 Inventory goes up by $900 The two entries Inventory is an account Simple T-Shirt Balance Sheet: Assets Cash $ 300 t-shirts (inventory) $ 900 Assets are: $ 1,200 22...
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m3l6 - David Robinson D. Robinson, 2011 Fall 2011 Module 3...

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