New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

week 1

by: Nazifa Islam

week 1 ACCT 2010

Nazifa Islam
View Full Document for 0 Karma

View Full Document


Unlock These Notes for FREE

Enter your email below and we will instantly email you these Notes for Fundamentals of Financial Accounting

(Limited time offer)

Unlock Notes

Already have a StudySoup account? Login here

Unlock FREE Class Notes

Enter your email below to receive Fundamentals of Financial Accounting notes

Everyone needs better class notes. Enter your email and we will send you notes for this class for free.

Unlock FREE notes

About this Document

Notes form Chapter One Presentation and Chapter One LearnSmart
Fundamentals of Financial Accounting
Dr. J McMillan
Class Notes




Popular in Fundamentals of Financial Accounting

Popular in Accounting

This 5 page Class Notes was uploaded by Nazifa Islam on Wednesday February 24, 2016. The Class Notes belongs to ACCT 2010 at Clemson University taught by Dr. J McMillan in Fall 2016. Since its upload, it has received 71 views. For similar materials see Fundamentals of Financial Accounting in Accounting at Clemson University.


Reviews for week 1


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 02/24/16
Chapter One Presentation 3 primary forms of business organization All have the same goal: generate profit 1. Sole proprietorship (72% of businesses in the U.S.) 2. Partnership 3. Corporation Characteristic  Sole Prop. Partnership Corporation # of owners Only 1 2+ 1+ Ownership acquired  No  No Yes via stock Liable for debts Yes Yes No Pay tax on business  No No  Yes income also ***Notice how sole proprietorship and partnership don’t have to pay a double tax (benefit)  Financial Accounting Reports/ Financial Statements (Outside company) (Inside company)  External use   Internal users Creditors (Bank) Owners & managers  Investors Directors Gov. Assets (resources owned by the company) = liabilities(resources owed to creditors) +  stockholder’s equity (resources owed to stockholders)  Separate Entity Assumption: assumes financial reports of a business only include the results of that business’s activities  Assets include: cash, accounts receivable, supplies, software, and equipment Liabilities include: accounts payable, rent payable, wages payable, and notes payable *Anytime you see the term “payable” with an account, you should associate it with a liability  account Stockholder’s equity: Refers to the owner’s claims on the business  Common stock: Equity paid in by stockholders    Net income/profit will increase retained earnings A net loss will decrease it Retained earning: Equity earned by the company  Revenue accounts: Represent the amounts the company has earned by selling goods/services to  customers. Also known as “sales revenue” and “service revenue”  Expenses: cost of doing business/generate revenue Examples: rent expense, salary and wage expense, advertising expense  Dividends: distributions to stockholders ( usually cash ) NOT CONSIDERED AN EXPENSE  At the end of every period there are FOUR financial statements.  1. Income statement: includes all revenue accounts, expense accounts  a. The difference between the two will result in net income/loss b. Revenue – expense = net income/ loss  2. Statement of retained earnings: ending balance of retained earnings  a. Beginning RE + net income – dividends = Ending RE 3. Balance sheet: report assets, liabilities, and stockholder’s equity for a specific point in  time  a. A = L + SE (common stock and retained earning) b. The ending balance here will become the next periods new balance 4. Statement of cash flows: cash exchanges a. THIS REPORTS ACTIVITITIES ONLY INVOLVING CASH  b. Divided into 3 types  i. Operating activities (paycheck, running the business) ii. Investing activities (buying/selling assets) iii. Financing activities (transactions with company’s own stock (loan) ) Sum of cash flows indicates change in cash Ending cash balance = cash on balance sheet  FASB: Financial Accounting Standards Board  Determines the rules for reporting accounting information and producing financial statements.  The rules are referred to as GAAP. GAAP: Generally Accepted Accounting Principles  When it comes to most accounting rules, the USA has similar ones to those of the rest of the  world. They’re trying to create more similarities and they’re working with IASB IASB: International Accounting Standards IFRS: International Financial Reporting Standards Rules used internationally  Financial information’s main goal is to be useful. Faithful representation & relevance ** Chapter One LearnSmart ORGANIZATIONAL FORMS  Sole proprietorship: Owned/ operated by one person o Get a business license and you’re good o Profit/loss apart of owner’s tax income   Partnership: Two or more owners o Slightly more expensive  o Need lawyer to draw up agreement  o More resources available, more room for growth *  Corporation: Corporation, not owners, is responsible for taxes/ debts  o Owners can’t lose more than their investment o High legal fees o Income tax must be paid by individual and corporation o Can raise large amounts of money for growth  o *Stock certificate  o Most will start out as private and will apply to be a public company if they need a  lot of financing  o *Issuing new stock certificates to investors*  Other type: Limited Liability Company (LLC) – Combination of partnership and  corporation Accounting: A system of analyzing, recording, and summarizing the result’s of a business’s  activities and then reporting the results to the decision makers. “Language of business” Private accountant: hired as an employee Public accountant: works for many companies  1. Managerial Accounting Reports i. Detailed financial plans ii. Updated reports about the operating performance iii. Only available to internal users iv. Should we rent, built, or buy this building? Discontinue product? 2. Financial Accounting Reports/ Financial Statements  i. Provide information to outsiders ii. Are not given access to detailed internal records 4 TYPES OF EXTERNAL USERS 1. Creditors (CONTRACT): Supplies, banks, anyone to whom money is owed 2. Investors (VALUE): Existing and potential stockholders 3.  Board of  directors (GOVERN): Oversee company’s managers 4. Government (REGULATE) : SEC and International Revenue Service (IRS) What a company owns must equal what a company owes to its creditors and stockholders Assets = Liabilities + Stockholder’s Equity  Basic accounting equation  Separate entity assumption: The BUSINESS, not the stockholders who own the  business, own the assets and OWE the liabilities  o Requires that a business’s financial reports include ONLY the business’s  activities  Assets: An economic resource. Measurable value   Liabilities: Measurable amounts that the company owes to creditors   Stockholder’s Equity: Represents the owner’s claim  Common Stock: Equity paid in by stockholders  Retained Earning: Equity earned by the company   Revenues: Earned by selling goods/services to customers   Expenses: All costs of doing business that are necessary to earn revenues (Advertising,  utilities, rent, salaries, and wages)   Net income: Revenues minus expense. By generating net income, a company increases  its stockholder’s equity   Dividends: An optional distribution of earnings to stockholders  o Dividends are NOT an expense incurred to generate earnings   Financial Statements: Income statement, statement of retained earnings, balance sheet,  statement of cash flows   1 .     Income Statement / Statement of Operations a. Heading identities who, what, and when b. Unit of measure assumption: The United States will use U.S. dollar  c. Body of income statement: Revenues – Expenses = Net Income  2. Statement of Retained Earnings: Reports the way net income and the distribution of  dividends affected the company 3. Balance Sheet/Statement of Financial Position: Reports the amount of a business’s assets a. CASH is the first asset reported  b. Cost principle: Assets are reported based on their ORIGINAL cost  4. Statement of Cash Flows: Activities that result in cash changing hands  1. Operating: Related to running the business to earn profit  a. Employee wages, rent, insurance, advertising, etc. 2. Investing: Buying/selling productive long­term resources  3. Financing: Loans, paying dividends to stockholders  Sarbanes­Oxley Act (SOX) : A set of laws established to strengthen corporate reporting in the  United States Top managers of public companies have to sign certifying their responsibilities  for financial statements 


Buy Material

Are you sure you want to buy this material for

0 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Allison Fischer University of Alabama

"I signed up to be an Elite Notetaker with 2 of my sorority sisters this semester. We just posted our notes weekly and were each making over $600 per month. I LOVE StudySoup!"

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.