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Loyola Marymount University - BADM 3030 - Class Notes - Week 2

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Loyola Marymount University - BADM 3030 - Class Notes - Week 2

School: Loyola Marymount University
Department: Business
Course: Key Concepts of Accounting and Finance
Professor: J. Mark Hattendorf
Term: Spring 2018
Tags: Accounting and finance
Name: BADM 3030, Chapter #2, Class #3, Week #2
Description: These are very useful and detailed notes that give a great overview of the material that will be covered going forward. They are very useful for studying for future quizzes and mid-terms.
Uploaded: 02/12/2018
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background image Chapter #2 | Class #3  Goals:  1. Quiz #1 - Chapter #1 
2. Review Ch. 2 slides - Part I
3. Cover H2 Answers 
4. Review Ch. 2 slides - Part 2 
5. Prep for Quiz #2 on Thursday 
Internal control:  ● You issue a check, and someone else has to sign the check. 
● Getting an invoice but it has to be approved by someone else in the 
organization. ● When we signed up for the course: we had to go through the  Registrar’s office; it’s a check-and-balance system to ensure that the 
professor doesn’t admit other students into the class; students that 
he’s charging other rates for example. 
Ch. 2 summary structure & interrelationship of FS ● Legal entity. - “inc.” and “corp.” refer to the legal entity of the  corporation. This limits liability in the event that a company loses 
money; you cannot sue the shareholders but rather you can only sue 
the corporation in question. The corporation, as long as it remains 
financially solvent, can live on forever. 
○ There are multiple types of legal entities. There are not-for- profits, government entities  ○ Partnerships - which do not have an indefinite life and one  partner is legally liable for the actions of the other within the 
partnership.  
● Every legal entity has a set of financial statements. 
● Need to be accurate, timely, and relevant.
● Materiality - needs to be significant. The old rule, 80% right is enough 
to get by, is not true in financial statements.  ● Closing the books  ○ Can close books on a weekly, monthly, or annual basis. Usually  occurs monthly. Snapshot of assets, liabilities, equity.  ○ Ex. - “freeze frame of a football video”  ● Chart of accounts  ○ Organizes data into relevant data 
background image ○ See p. 20: It is the organizing system for a company’s accounting data, like a collection of buckets into which the data is 
summarized by category. 
● Cycle - from transactions to financial statements  ○ Transaction 
○ Chart of accounts 
Most companies disappear.  Product (industry) life cycle stages: Introduction, Growth, Maturity, (plateau;
not included on graph on slide), Decline. 
“There is only boss, the customer. And he can fire everybody in the company
from the chairman on down, simply by spending his money somewhere 
else.” 
 
Good co’s postpone their “decline” indefinitely by  ● Renewal / rebirth / resurgence  Three principal financial statements ● Income statement - an accounting of revenue, expenses, and profit for  a given accounting period. Also known as  “P&L” or profit & loss…. Or 
“statement of operations.”  
● Balance sheet is a snapshot of a company’s financial position as a  point in time. Balance sheet has assets and liabilities.  ● Statement of Cash Flows - shows the effect of all transactions that  involved or influenced cash, but did not appear on the income 
statement. 
○ Business is broken down into three buckets: operating,  investing, and financing cash flows. O-I-F.  ● Retained Earnings statement (not covered in this course) ○ Dividends are not items on the income statements; it is not an  expense. It goes on the retained earnings statement.   ART - Accurate, relevant, timely. Trade-off between degree of perfection and 
of obtaining it. 
Materiality - A matter may be judged “material” if users of financial 
statements may be influenced by knowing it. Consider Enron & Worldcom 
(telecommunications company; scandals) - If it’s an important piece of 

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School: Loyola Marymount University
Department: Business
Course: Key Concepts of Accounting and Finance
Professor: J. Mark Hattendorf
Term: Spring 2018
Tags: Accounting and finance
Name: BADM 3030, Chapter #2, Class #3, Week #2
Description: These are very useful and detailed notes that give a great overview of the material that will be covered going forward. They are very useful for studying for future quizzes and mid-terms.
Uploaded: 02/12/2018
6 Pages 24 Views 19 Unlocks
  • Better Grades Guarantee
  • 24/7 Homework help
  • Notes, Study Guides, Flashcards + More!
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