Module 1 Notes
Module 1 Notes ACG 3074
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This 3 page Class Notes was uploaded by Julianna Smith on Friday January 29, 2016. The Class Notes belongs to ACG 3074 at University of South Florida taught by Christine Andrews in Spring 2016. Since its upload, it has received 42 views. For similar materials see Managerial Accounting for Non-majors in Accounting at University of South Florida.
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Date Created: 01/29/16
Managerial Accounting for Non-Majors Chapter 1 - Accounting and the Business Environment >M1.1 Organizations and Rules (Video Lecture) -Accounting - information system that measures business activities, processes the information into reports, and communicates the results to decision makers Financial Accounting - external decision makers, prepared under structured rules, compared between companies, high level aggregate numbers Managerial Accounting - internal decision makers, decide production levels, part of management within company, disaggregate numbers -Governing Organizations for Accounting 1. Financial Accounting Standards Board (FASB) - privately funded, creates rules and standards govern financial accounting 2. Securities and Exchange Commission (SEC) - oversees US financial markets Generally Accepted Accounting Principles (GAAP) - rules for recording transactions and preparing financial statements; ensures information useful -relevant - info allows users to make decision -faithfully representative - info is complete, neutral, and free from material error Accounting Assumptions: -Economic Entity Assumption - a business as a separate economic unit (Example: sole proprietorship, partnership, corporation, limited-liability company or LLC) -Cost Principle - assets and services should be recorded at actual cost (referred to as historical cost) -Going Concern Assumption - business will remain in operation for a foreseeable future, ensuring the use of existing resources -Monetary Unit Assumption – requires financial statements to be measured in monetary units >M1.2 The Accounting Equation (Video Lecture) Assets = Liabilities + Equity Rule: the accounting equation must ALWAYS equal -Current (when divided between assets/liabilities) account will turn to cash within one year or operating cycle -Assets - something of value that the business owns or has control of, a benefit Current Assets: Cash, Accounts Receivable, Notes Receivable, Inventory, Supplies, Prepaid Rent Long Term Assets: Land, Building, Equipment -Liabilities - debts owed to creditor, something the business owes and represent creditors’ claims on business’s assets Current Liabilites: Accounts Payable, Notes Payable (current), Income Taxes Payable, Unearned Revenue Long Term Liabilities: Long Term Notes Payable, Bonds Payable -Equity - owners’ claims to assets, amount of assets left over after the company has paid its liabilities, company’s net worth [Contributed Capital]: Common Stock, Paid-in-Capital (Treasury Stock) [Earned Capital]: Retained Earnings headings not listed on balance sheet >M1.3 Transactions Analysis -Transaction – any event that affects the financial position of the business and can be measured with faithful representation Step 1: Identify the accounts and the account type. Step 2: Decide if each account increases or decreases. Step 3: Determine if the accounting equation is in balance. *always should be >M1.4 Prepare Financial Statements -financial statements – business documents that are used to communicate information needed to make business decisions 1. Income Statement – reports net income or net loss of business for specific period; lists revenues and expenses, with totals, then net income or loss (Revenues – Expenses = Net Income (Loss) Net Income means total revenues are greater than total expenses Net Loss means total expenses are greater than total revenues 2. Statement of Retained Earnings – reports how the company’s retained earnings balance changed from the beginning to the end of the period; net income (loss) transferred from income statement, dividends subtracted Retained Earnings (ending balance appears in Stockholders’ Equity of Balance Sheet) 3. Balance Sheet – reports on the assets, liabilities, and stockholders’ equity of the business as of a specific date; assets listed and totaled, liabilities listed and totaled, stockholders’ equity listed and totaled, liabilities and stockholders’ equity totaled follows Accounting Equation 4. Statement of Cash Flows – reports on business’s cash receipts and cash payments for a specific period; Operating Activites (current assets and liabilities, cash receipts for services provided and cash payments for expenses paid and net cash totaled), Investing Activities (long-term assets, purchase and sale of land and equipment for cash and net cash totaled), Financing Activities (long-term liability and equity, issuance of stock to stockholders and payment of cash dividends and net cash totaled), cash balance matches cash balance on balance sheet -Summary: 1. Income Statement Revenues – Expenses 2. Statement of Retained Earnings Beginning balance + Net Income – Dividends = Ending Balance 3. Balance Sheet Assets = Liabilities + Equity 4. Statement of Cash Flows Cash Flows from Operating Activities, Investing Activities, and Financing Activities Equations: Accounting Equation Assets = Liabilities + Equity Stockholders’ Equity Equation Beginning Equity + Common Stock + Net Income (or – Net Loss) – Dividends = Ending Equity Ending Equity – Beginning Equity - Common Stock + Dividends = Net Income (Loss) Net Income Formula Revenues – Expenses = Net Income (Loss)
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