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CH 1 notes

by: Nisha Esmail

CH 1 notes Accounting 2101

Nisha Esmail
GPA 3.89

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About this Document

Intro to Financial Statements
Principal of Accounting I
Kris Clark
Class Notes
Accounting, business, organization, investing, Operating, financing
25 ?




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This 2 page Class Notes was uploaded by Nisha Esmail on Tuesday August 23, 2016. The Class Notes belongs to Accounting 2101 at Georgia State University taught by Kris Clark in Fall 2016. Since its upload, it has received 34 views. For similar materials see Principal of Accounting I in Accounting at Georgia State University.


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Date Created: 08/23/16
Accounting I August 22, 2016 CH 1 I. Intro to Financial Statements a. Forms of Business Organization i. Sole Proprietorship (control everything in business) 1. Simple establishment 2. Owner controlled 3. Tax advantages ii. Partnership (need people to help you in business) 1. Simple establishment 2. Shared controlled – all skills sets are needed 3. Broader skills and resources 4. Tax advantages iii. Corporation (easier to get money) 1. Easier to transfer ownership 2. Easier to raise funds 3. No personal liability b. Users and Uses of Financial Info i. Internal Users – employee / accounting management (marketing, finance) ii. External Users – anyone (investors, creditors, etc) c. Business Activities – accounting info system keeps track of results of business activities i. Financing ii. Investing iii. Operating 1. Finance Activities a. Borrow money (amounts owed are liabilities) i. People you owe are creditors b. Issue (sell) stock for cash (equity) i. Payments to stockholders are dividends 2. Investing Activities a. Computers, trucks, etc b. Resources owned are assets 3. Operating Activities a. Revenues – amounts earned from sale b. Inventory – goods available to sell c. Accounts receivable – right to money from sale d. Expenses – cost of assets consumed or service used e. Net income – revenues > expenses f. Net loss – revenues < expenses d. Types of Statements i. Income Statements 1. Reports revenues/expense for period of time 2. Past reports give predictors for future ii. Returned Earning Statement Accounting I August 22, 2016 CH 1 1. Shows amounts + causes of change in earnings over period of time 2. Time period is same as income statement 3. One can evaluate dividend payment practices iii. Balance Sheet 1. Reports assets and claims at specific point in time 2. Assets = liabilities + stockholder equity 3. LIST ASSETS FIRST. iv. Statement of Cash Flow 1. Answers questions of [EVERYTHING ABOUT THE CASH IN PLAY] a. Where did cash come from? b. How was cash used? c. What was change in cash balance? v. Annual Report 1. Includes the following a. Financial statements b. Management discussion/analysis i. presents view on company ability to pay near-term obligations, ability to fund operations/expansion, and results of the operation ii. Highlight favorable and unfavorable trends/identify significant events and uncertainties that affect above factors c. Notes to financial statements i. Clarify financial statement ii. Prove further detail iii. ESSENTIAL TO UNDERSTANDING OPERATIONS AND FINANCE POSITION d. Auditor’s report i. Opinion to fairness of presentation of finance position and results of operation / conformance with accepted accounting principles ii. ONLY CPA’S CAN DO THIS


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