Introduction to Accounting- 1/29/15
Introduction to Accounting- 1/29/15 MBUS 300
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This 4 page Class Notes was uploaded by Aimee Castillon on Sunday January 31, 2016. The Class Notes belongs to MBUS 300 at George Mason University taught by Reza Rafi in Spring 2016. Since its upload, it has received 109 views. For similar materials see Managing Financial Resources in Business at George Mason University.
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Date Created: 01/31/16
Organization name Aimee Castillon Managing Financial Resources MBUS 300 • Spring 2016 email@example.com Heading: 1/29/16 Notes: Chapter 1 Intro to Accounting accounting i s an information system that reports on the economic activities and financial condition of a business or other organization. Accounting provides information that is useful in answering questions about resource allocation Marketbased allocations a market is a group of ppl or entities organized to exchange items of value common terms for the added value created in the transformation process: profit income earnings financial resources conversion agents need financial resources (money) to establish and operate their businesses investors creditors Physical resources a re called natural resources owners of physical resources seek to sell those resources to profitable businesses which are able to pay higher prices and make repeat purchases labor resources include both intellectual and physical labor workers seek relationships with businesses that have high earnings potential because these businesses are better able to pay high wages types of accounting information Know the difference financial accounting focused on the needs of external users between financial and managerial accounting “ “ “ “ “ internal users managerial accounting not all entities allocate resources based on profitability. Organizations that are not motivated by profit are called notforprofit entities government, foundations, religious groups, the Peace Corps, and various benevolent organizations allocate resources based on humanitarian concerns GAAP = General Accepted Accounting Principles careers in accounting public accounting = Certified Public Accountant (i.e. audit, tax, and consulting services) private accounting = Certified Management Accountant; Certified Internal Auditor accountants establish measurement and reporting rules that businesses use to facilitate communication FASB = Generally Accepted Accounting Principles reporting entities financial accounting reports disclose the financial activities of particular individuals or organizations described as r eporting entities each entity is treated as a separate reporting unit Elements of Financial Statements 1. assets what you own (i.e. cash, equipment, buildings, land) 2. liabilities what you owe 3. equity what you have in the company (stock) 4. contributed capital what the owner contributed to start and maintain company 5. revenue what you earn by selling services or product 6. expenses what you spent to be able to be in the business to sell stuff 7. distributions what you distribute to owners as a profit 8. net income = revenue expenses 9. gains what you make on selling equipment and properties 10. losses what you lose “ “ “ “ “ subclassifications of the elements are frequently called a ccounts accounts are reported in the financial statements accounting equation Assets = claims claims on the assets are from creditors (liabilities) and investors/owners (equity) claims= liabilities + stockholders’ equity stockholders’ equity = common stock + retained earnings retained earning = net profit/income dividend net income = revenue expenses assets = liabilities + common stock + retained earnings Types of transactions asset source transaction increase total assets, increase total claims asset exchange transaction increase one asset, decrease another asset asset use transaction decrease total assets, decrease total claims Preparing Financial Statements matching concept revenues are matched to expenses net loss results when expenses exceed revenues Income is measured for a span of time called the accounting period Three sections of cash flow statements: operating, investing, & financing the closing process transfers net income (or loss) and dividends to retained earnings establishes zero balances in all revenue, expense, and dividend accounts Financial statement model annuals reports contain financial statements, notes, auditor’s report, and management’s discussion and analysis (MD&A)
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