Accounting for Liabilities
Capital structure is the mix of debt and equity
used to finance a company.
Loans from banks, insurance companies, or pension
funds are often used when borrowing small amounts of
Accounting for Shareholders Equity
Equity in Corporations
The equity section for a corporation is divided into two parts:
Contributed Capital (a.k.a. paid-in-
capital)-this is the amount that owners have contributed
Capital Stock Additional
Chapter 6 Payment for Goods and Services: Cash and Accounts Receivable
Receiving Payment For Goods And Services
Cash (includes checks): control is the biggest issue Credit: accounts receivable Bad debts
The Purchase and Sale of Inventory
Assets held for resale or for use in the production of goods for sale Inventory is tangible property that is held for resale or will be used in producing goods or services.
Acquisition and Use of Long-Term
Tangible vs. Intangible
Actively Used in Operations
Expected to Benefit Future Periods
Accruals and Deferrals:
Timing is Everything in Accounting
More About Accruals
Accrual Accounting: Recording the
financial transactions of a business in the
period in which they occur, rather than in
the period in which cash is exchanged.
Qualities of Accounting Information
Who Sets the Rules?
Securities and Exchange Commission (SEC) has the legal authority to set the accounting rules for companies that are publicly traded. The SEC has delegated that responsibility to the accou
Business: What’s it all About?
• Financial accounting
- Accounting equation
- Balance Sheet
- Income Statement
- Statement of Changes in Owners’ Equity
- Statement of Cash Flows
Simple Model of a Business
The Mechanics of an Accounting System
The Traditional Way to Keep the Books: The General Ledger System
THE ACCOUNTING CYCLE: Transactions occur in the normal course of business. We record them in our records with a JOURNAL ENTRY. Journal entr