Financial Acct notes!
Financial Acct notes! Bus 101
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This 6 page Class Notes was uploaded by Laura Dominguez on Monday February 8, 2016. The Class Notes belongs to Bus 101 at La Salle University taught by in Spring 2015. Since its upload, it has received 28 views. For similar materials see Financial Accounting in Business at La Salle University.
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Date Created: 02/08/16
FINANCIAL ACCOUNTING 101 Accounting: Systematic presentation and interpretation of financial information. 1. Financial acct: for people outside the business. Limited detail 2. Managerial acct: for people inside the business. Much detail Fin acct: 1. Financial statements* (worth 10 points on every exam) a. Balance sheet: formal statement of the assets, liabilities, and equity for one day. b. Income statement: formal statement of revenue, costs of merchandise sold, and expenses for a period of time. c. Cash flow statement: formal statement of the sources and uses of cash from operations, investments, and finance activities for a period of time. Cash flow: cash only (no credit cards/credit. U.S. currency and coin, checks.) source & use 1. La Salle’s new business building. Growing tuition money by putting it in stock market etc. is operations 2. Investment: then having enough to construct a new building 3. How do you afford/get the money to buy things is by financing the purchase. Assets: something of value owned by the business. Value is up for interpretation. 1. Land 2. Equipment 3. Cash 4. Account receivable: a debtor (owes us money) a. Credit cards 5. Note receivable: owes us money in writing formal signed a. Loans Liability: anyone we owe money to 1. Account payable: we owe money a. credit card 2. Note payable: formal legal document. owed money. 3. PAYABLE means I owe money 4. Unearned revenue: service owed to someone. They already paid but service has not yet been provided/provided fully. a. If I am La Salle, I owe the service of education to whoever paid the cost of tuition. i. “unearned tuition revenue” b. prepaid cellphone carriers (only if it is prepaid) c. gym memberships (if prepaid before service is used) d. airplane flights Equity: owners are called stockholders or shareholders. 1. Stockholders: a. Owners of the business i. Single proprietorship ii. Partnership 2. Shareholders: i. Corporation: stockholders have say on business operations ii. Retained earnings Income statement: formal statement of revenue, costs, and expenses. Revenue (sales/fees/earnings): money made through good/service sold. a. The increase in equity from operations. Expense: necessary cost of operations. a. The decrease in equity from operations. a. E.g. paying for electricity. (you do not own electricity but you pay for it). b. Necessary cost for operating. Expenses need to be continuously paid for whereas assets are owned indefinitely/kept or sold at the discretion of owner. ACCT EQUATION: Assets = liability + equity Equity = assets – liability You can have an asset which you do not own completely, but you eventually will—therefore, it counts as an asset. E.g. house, car/mortgage, payments. In balance sheet, set order of assets from most to least liquid. Assets = liability + equity Assets Cash Receivables List the rest in order of decreasing liquidity Total assets: $$$$$$ Liabilities Acct. payable Notes payable Salary payable Total liabilities: $$$ Equity Stock Retained earnings Total liabilities and equity: $$$$$$ If you don’t pay what you owe (both note and account payables) your credit as a company goes down and you get a bad rep. Dividend: portion of what we earn that goes to owners. Revenue: (income statement) $ sold – expenses= net income *salary payable: is only there (in the balance sheet as part of liabilities) when there is salary to be paid, but not if salaries were just paid and are not owed. At that point, “cash” would decrease (in the assets section). Revenue Goods sold $$$ Expenses $$$ Net Income $$$ Ch. 2 Account: business form used to show changes in accounting equation. Accounts for changes in financial situation of company. a. Was salary payable paid off? b. Were receivables paid to company? c. Was equipment sold? Etc. etc. *if customer pays you with credit card, you put that into the “account receivables” part of assets (in your balance sheet) and you fix your revenue accordingly (within the income statement). “on account”: purchase made on credit. GAAP: rules/laws Account: form used to show changes in acct equation Ledger: group of accounts 1. Permanent acct: for several periods. Assets, liabilities, equity. (Balance sheet) 2. Temporary acct: last for 1 period. Rev, cost of merch. sold, expenses. (Income Statement) “T” Account Name Debit Credit Balance of an acct: difference between the debits and credits in an account. All assets have debit balance. All liabilities always have credit balance. All equity always has credit balance. All revenue always has credit balance. All cost of merchandise sold has debit balance. All expenses always have a debit balance. A group of T accounts is a ledger.
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