FA - Material overview [Ch 1 - Ch 9] (1).pdf - Material...

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Material overview Financial Accounting Made by Ties de Kok for ACCTG 219 (UW Foster) Class 1 (Ch 1.) What is financial accounting ?
What is management accounting ?
Class 2 (Ch 2.) Financial statements: o Balance Sheet S napshot” of what the firms owns and owes at a given point in time. o Income Statement Report of the economic performance of the firm over a time period. o Statement of Stockholders’ Equity Report of transactions with owners over a time period. o Statement of Cash Flows Report of sources and uses of cash over a time period. Types of business activities: o Financing Actions to obtain money for the purpose of investing o Investing Actions to spend the money to purchase assets for operating o Operating Using assets to generate revenues Accounting equation: o Assets = Liabilities + Stockholders’ equity
“Stockholders’ equity” is often abbreviated as just “ equity” o Two core rules that always need to hold: Left side (assets) is always == right side (liabilities + equity) Each transaction influences at least two different accounts Balance Sheet o Follows rules of accounting equation o Three elements: Assets Current assets those that are expected to be sold within 12 months o Accounts receivable: Sales that have been made where the customer bought on account and will pay cash in the future. Note: Credit card purchases are not considered accounts receivable as the company will receive the money as if it was cash, the bank will treat it as a receivable. Long-term assets not expected to be sold with 12 months Liabilities Current liabilities those that are expected to be paid back within 12 months o Accounts payable: Purchases that the company made where they bought on account and will pay cash to the seller in the future. Long-term liabilities not expected to be paid back in 12 months Stockholders’ Equity Contribution / Paid-in capital o Common stock / additional paid-in capital Earned capital Retained earnings o Ending retained earnings = beginning retained earnings + net income dividends o Dividends:
Part of retained earnings paid back in cash to the investors as a bonus for providing their investment. (see Ch. 3) o Retained earnings can be both negative and positive o Tip to decide whether something is an asset or liability: If you owe someone else liability If someone else owes you asset o The ending balance of the previous period will be the starting balance of the current period.

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