Accounting 215, Week 2
Accounting 215, Week 2 ACCTG 215
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This 3 page Class Notes was uploaded by Anastasia Fischer on Saturday January 9, 2016. The Class Notes belongs to ACCTG 215 at University of Washington taught by Peter Demerjian in Summer 2015. Since its upload, it has received 16 views. For similar materials see Introduction to Accounting and Financial Reporting in Accounting at University of Washington.
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Date Created: 01/09/16
Accounting Week 2 Income Statement The multi step income statement has three sections 1.) operating revenue 2.) Operating expenses Operating income 3.) Other items Investment income Interest expense Gain/loss on asset sales Income taxes Net Income Ledger T-Accounts After recording all journal entries, ending account balances are determined by posting to the general ledger. Remember: balance sheet accounts are cumulative, so you must consider beginning balances We summarize general ledger activity is to use T-Accounts Each account needs a separate T-Account Every journal entry links to two (or more) T-Accounts Trial Balance The trial balance aggregates the ending balances of all the T-Accounts This is the final step before building the balance sheet Chapter 3 Accounting (Balance Sheet equation Assets = Liability + Shareholders' Equity Shareholders' Equity has two components: Shareholders' Equity = Contributed Capital + Retained Earning Net income increases retained earnings, hence increasing shareholders' equity Revenue increases net income: o o Increasing retained earnings o Increasing shareholders' equity Expense decrease net income o Decreasing retained earnings o Decreasing shareholders' equity In short o Revenue ncreases net income/retained earnings/ shareholders' equity o Expense decreases net income/ retained earnings / shareholders equity SO when we analyze operating activities we must remember A retained Earnings Equation: Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends Net Income: Net Income = Revenue - Expenses
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