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Finance 2013 Sept10 Accounting(1)

eq assets assets income statement revenue ending

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Unformatted text preview: investment Beginning Balance Sheet Liab. & Eq. Assets Assets Income Statement Revenue Ending Balance Sheet Assets Liab. & Eq. (Expenses) Inc. bef. Tax (Tax) Net Income Initial Investment (Capitalization) Shareholder Dividends Retained Earnings New Equity Debt Basic Accounting Model Basic Primary Equations 1. Financial Position Assets = Liabilities + Owner’s Equity 1. Results of Operations Revenues + Gains – Expenses – Losses = Income 1. Cash Flow Cash inflow – Cash outflow = Change in cash 1. Recording increases/decreases in accounts Debits = Credits Double-entry Accounting System Double-entry Dual balancing features: 1. Assets = Liabilities + Owner’s Equity 2. Debits = Credits T-Accounts T-Accounts T-Account Debit Credit T-Accounts T-Accounts Financial Financial Position Position Equation Debit = Credit Feature Assets = Liabilities Debit for Credit for Debit for Credit for Credit Credit Increases Decreases Decreases Increases Decreases Increases + Owners’ Equity Debit for Credit for Credit Decreases Increases Increases T-Accounts T-Accounts Because: (1) Investment by owners, revenues & gains increase owners’ equity Investment increase and and (2) Distributions to owners, expenses & losses decrease owners’ equity, Distributions decrease The T- account model can be expanded as follows: Assets Debit for Credit for Credit Increases Decreases Decreases = Liabilities + Owners’ Equity Debit for Debit for Credit for Decreases: Credit Decreases Increases - Distributions Increases - Expenses - Losses Credit for Credit Increases: Increases: - Investments - Revenues - Gains...
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