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ACC 201 Chapter 1

by: Jenequa Duren

ACC 201 Chapter 1 201

Jenequa Duren

GPA 3.0
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About this Document

A brief overview of some key terms and equations from the first chapter.
Financial Accounting
Amanda Cromartie
Class Notes
Math, Accounting




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This 3 page Class Notes was uploaded by Jenequa Duren on Wednesday January 20, 2016. The Class Notes belongs to 201 at University of North Carolina at Greensboro taught by Amanda Cromartie in Spring 2016. Since its upload, it has received 63 views. For similar materials see Financial Accounting in Accounting at University of North Carolina at Greensboro.


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Date Created: 01/20/16
ACC 201: Chapter 1 Notes For-profit organizations have the goal of making profits for its owners. Non-for-profits organizations have the goal of providing a good or service to its clients. Types of Businesses 1. Service Organizations a. Provide a service to its customers 2. Merchandising Business a. Buys goods, adds value to them and then sells them to another business (wholesale) or a customer (retail). 3. Manufacturer a. Makes the goods it sells 4. Financial Services Firm a. Deal in services related to money Forms of Business Ownership 1. Sole Proprietorship a. Owned by a single person b. No legal separation of business and personal finances 2. Partnership a. Owned by two or more people b. Similar to sole proprietorship c. Income the partners earn (or lose) from the business is included in their personal tax returns 3. Corporation a. Owner and business are legally separated and the owners are not liable for the business b. Divided in units called common stock c. Have the most government regulations; but it is easier to raise capital and transfer ownership Characteristics of Different Forms of Business 1. Personal liability 2. Taxation 3. Transfer of ownership 4. Ability to raise capital 5. Government regulation 1 Business Transactions 1. Operating a. General day to day operations of the firm 2. Investing a. Buying and selling items that the firm will use longer than one year 3. Financing a. Transactions that deal with funding the business Accounting Equations  Assets = Claims (Liabilities + Shareholder’s Equity)  “Net Assets” = Equity (Assets – Liability)  Shareholder’s Equity = Contributed Capital + Retained Earnings  Retained Earnings = Net Income (Loss) – Dividends  Net Income (Loss) = Revenue – Expenses Define the Terms 1. Assets: Something of value  Cash  Plants  Inventory  Property  Supplies  Accounts receivable  Equipment 2. Liabilities: Obligations and amounts that the company owe to creditors  Accounts Payable  Notes Payable  Accruals 3. Shareholder’s Equity: the owners’ claims to the assets of the company a. Contributed Capital: amount invested b. Retained Earnings: total of company’s net income (loss) and dividends i. Revenue: amount earned from providing goods and services ii. Expenses: cost incurred to gain revenue 2 Basic Financial Statements 1. Balance Sheets a. Summarizes accounting equations at a point in time b. Assets = Liability + Shareholder’s Equity 2. Income Statement a. Summarizes revenues minus expenses for a period of time b. Income = Revenue – Expenses 3. Statement of Changes in Shareholder’s Equity a. Summarizes change in shareholder’s equity for a period of time 4. Statements of Cash Flow a. Summarizes cash activity for a period of time i. Cash from operating activities (OA) ii. Cash from investing activities (IA) iii. Cash from financing activities (FA) 1. All publicly traded companies are required by Securities and Exchange Commissions (SEC) to issue annual financial reports which include the four financial statements. 2. These reports are verified or certified by Certified Public Accountants (CPAs). 3. Thesecompanies(inthe UnitedStates)followone set of accountingrules whichareknown as Generally Accepted Accounting Principles (US-GAAP). 4. Theseaccountingrules areestablishedbya group called Financial AccountingStandards Board (FASB). 3


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