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Accounting Week 1 Notes

by: Josephine Franz

Accounting Week 1 Notes ACCTG 215

Marketplace > University of Washington > Accounting > ACCTG 215 > Accounting Week 1 Notes
Josephine Franz
GPA 3.0

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About this Document

These notes cover Chap 1 and 2
Introduction to Accounting and Financial Reporting
Peter Demerjian
Class Notes
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This 5 page Class Notes was uploaded by Josephine Franz on Friday January 8, 2016. The Class Notes belongs to ACCTG 215 at University of Washington taught by Peter Demerjian in Fall 2015. Since its upload, it has received 408 views. For similar materials see Introduction to Accounting and Financial Reporting in Accounting at University of Washington.

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Date Created: 01/08/16
Accounting 215 Intro to Accounting & Financial Reporting Week 1 notes January 4, 2016: Professor: Peter Demerjian Office: Paccar Hall Room 473 Syllabus: (Found under Pages on canvas) -Using Canvas -Module for each lecture -Check at least once the night before class -Using Connect **Financial Accounting Book eighth edition NEEDED (Buy access code if you get a used book) -Online Homework System -12 graded Hmwrk assignments -Supplemental problems just for practice -Top Hat -In class questions (participation grade) -Class Schedule -Read material BEFORE class -Homework due according to schedule; questions from book -Exercizes posted on canvas; questions created by Peter -Quiz Section -Quizzes given in section -Grading -3 exams (65%) all "midterm" style -3 quizzes (20%) -Writing Assignment (5%) -Homework (5%) -Participation (5%) -Follow UW 4.0 gpa -Graded on an up curve (median score 85%) -Exam Rules -Seating charts -IDs -Class Details -Technology OK (only for class purposes) -Lecture Slides from class posted after. -Preliminary Lecture Slides posted night before lecture -Fairly Aggressive pace for class -Review the in-lecture examples -Acctg 215 Learning Goals -Conversant in the basics of financial accounting (bookkeeping fundamentals) -Able to get from a set of economic transactions to a set of fully articulating financial statements -Ready for future business classes -Develop Critical thinking skills Introductory Discussion: Running a Business: (See example in lecture slides – Newspaper Business) INCOME STATEMENT: Inflows and outflows of economics resources. Provides a summary of the economic activity of a business over some period of time. -Cash Revenue = # Cash Collections x Price/Week -Cash Cost = Total # Inventory bought (by you from supplier) x Cost/Week -Excess Cash: (Absolute value of) Cash Received - Profit -Profit: Total # Inventory x Profit/Customer Profit does not change if the money doesn’t exchange hands. When you do a service, you can expect to receive payment for it. Therefore Profit is the service done, not the cash received (cash received is excess cash if not equal to profit). ACCRUAL ACCOUNTING CONCEPT: -Transactions are recorded in the financial statements when they happen (cash does not need to change hands) -Captures the economic substance of the business's activities BALANCE SHEET: Provides the information of what the business owns and owes. (See Example from slides) NET INCOME: Profit reported on the Income Statement RETAINED EARNINGS: Profit reported on the Balance Sheet January 7, 2016 Learning Objectives: Understand some business basics: Business forms/accounting standards Review four financial statements: Balance sheets Learn transaction analysis: Spreadsheet method and the accounting equation; debits/credits Chapter 2: Business Forms: -Sole Proprietorships: Single owner. Mom and Pop shops; independent artisans; contract writers -Partnerships: Multiple owners. A risk sharing arrangement. -Corporations (private vs publicly traded): Multiple owners with limited liability --Private: Shares are held by founder/family members/employees --Publicly traded: Shares that are sold among investors publicly Standard Setting: GAAP: Generally Accepted Accounting Principles. Accounting rules that publicly traded corporations must report on. FASB: Financial Accounting Standard’s Board. Created GAAP. SEC: Security Exchange Commission. Independent enforcement service. Pursues civil litigation against firms with accounting problems. Requires 10-Q and 10-K filing IFRS: International Financial Recording Standards 4 Mandatory Financial Statements: -The Balance Sheet: “snapshot” what firm owes and owns at a specific point in time. -Income Statement: Show economic performance of firm over accounting period. Net income at bottom of statement is summary of the economics of firm -Statement of Changes in Shareholder’s Equity: Report of owner transactions. -Statement of Cash Flows: Source and use of cash over the accounting period. The Balance Sheet: Assets = Liability + Shareholder’s Equity 3 part: -Assets: What firms own, provides probable future economic value (current and non-current) Ex. Cash, Properties, Inventory, Investments -Liabilities: Probable future sacrifices of resources (current/non-current) Ex. Cash, Payables -Shareholder’s Equity: Residual claim to assets once liabilities are satisfied. What firm owns once the liability has been paid. Ex. Contributed capital, Retained earnings *Current means within a year. Recording Transactions Steps: 1. Determine effect on the accounting equation 2. Determine whether to debit or credit the affected accounts 3. Record transactions in journal entries 4. Post transactions to ledger 5. Prepare trial balance Accounting Equation: Assets = Liability + Shareholder’s Equity (It has to be equal!!) Every transaction will have at least 2 effects (See Phinneywood Bicycles Example on lecture slides) Debits and Credits: Shorthand for recording transactions Debit: Assets Credits: Liability and Shareholder’s Equity For asset accounts; Debit increases, Credit decreases For Liability/ Shareholders; Debit decreases, credit increases


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