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Financial Accounting Notes - Week 1 (1/19)

by: Liz Notetaker

Financial Accounting Notes - Week 1 (1/19) Acct 2331

Marketplace > University of Houston > Business > Acct 2331 > Financial Accounting Notes Week 1 1 19
Liz Notetaker
GPA 3.7

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About this Document

Notes from the first day of class.
Accounting Principles I - Financial
Mary Sykes
Class Notes
financial accounting
25 ?




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This 2 page Class Notes was uploaded by Liz Notetaker on Wednesday January 20, 2016. The Class Notes belongs to Acct 2331 at University of Houston taught by Mary Sykes in Spring 2016. Since its upload, it has received 53 views. For similar materials see Accounting Principles I - Financial in Business at University of Houston.


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Date Created: 01/20/16
Financial Accounting Notes – Week 1 (1/19 – 1/22) Chapter 1 Objectives • 2 primary functions of financial accounting • Business activities measured • Communication of information through financial statements • Role of financial accounting decision-making principles • GAAP – Generally Accepted Accounting Principles Business Activity = any financial transaction Paid = decrease the amount Received = increase the amount Primary Function: measure & communicate business activity through statements Users: Creditors & investors provide capital/money to corporation Accounting is an organized system of maintaining records & communicating it to decision makers Managerial: information provided to internal investors Investors -> Companies -> Accountant -> Investors -> (so on…) Business Structure Proprietorship: single owner (usually the way companies begin) Partnership: 2+ owners (unlimited personal liability for owners) Corporation: business separate from owners (upside=limited liability, downside=double taxation[corporate tax + dividend tax]) Liability: if the company is in legal trouble, it is the assets that can be taken by plaintiff. Limited liability: plaintiff can only take assets under the company name. Unlimited liability: plaintiff can take assets under company AND owner’s name. Basic Accounting Equation Assets = Liabilities + Stockholders’ Equity Assets: thinks we/company owns. They can never become revenue/sales, expense or stocks. Liability: Creditor’s claim (What we/company owe) Stockholders’ Equity: • Retained earnings: Revenue, Expenses, Dividends • Paid in Capital: Common Stocks Income Statement: Revenue – Expenses = Net Income EXCERCISES At the top is the Accounting Equation, at the bottom are scenarios from which you need to figure out in which account the financial activity should be posted. (The scenarios and financial activities are numbered accordingly) Assets = Liabilities + Stockholders’ Equity 1. Computer 2,000 = 2,000 2. Computer 1,000 = Cash <1,000> 3. Cash <80,000> = 80,000 4. Cash <500> = <500> 5. Cash 50,000 = 75,000 AR 25,000 AR: Accounts Receivable 6. Cash 30,000 = 30,000 7. Cash 20,000 = AR <20,000> 1. Purchase Computer on account for $2,000 (On Account = Credit) 2. Purchase computer on cash $1,000 3. Borrow $80,000 4. Paid $500 on computer 1 5. Earned $75,000 (revenue) Received $50,000 Cash Left $25,000 on accounts receivable 6. Issued $30,000 on common stock 7. Collected $25,000 from Accounts Receivable Statement of Stockholders’ Equity Shows the changes in stockholders’ equity in any given period. Stockholders’ Equity = Common Stock + Retained Earnings Accountants must create a number of statements in any given financial period. They are created in this order: 1. Income statement 2. Statement of Stockholders’ equity 3. Balance sheet (accounting equation)


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