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ACCT 225 Introductory Notes

by: Kate Reid

ACCT 225 Introductory Notes ACCT 225 002

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Kate Reid

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About this Document

Day One notes, basic overview of the concepts of accounting
Intro to Financial Accounting 225
Shannon D McCutchen
Class Notes
basic, equations, financial, Statements
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This 2 page Class Notes was uploaded by Kate Reid on Tuesday August 23, 2016. The Class Notes belongs to ACCT 225 002 at University of South Carolina taught by Shannon D McCutchen in Fall 2016. Since its upload, it has received 5 views.


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Date Created: 08/23/16
Chapter One: A Framework for Financial Accounting ● What is accounting? ○ An information measurement system ● Accounting  ○ Identifies ○ Records ○ Communicates ● Basic Business Types 1. Sole proprietorship 2. Partnership (2+) 3. Corporation ○ ACCT 225 will focus on publicly traded FOR­PROFIT companies ● Publicly traded companies abide by rules/principles/standards established by rule­setting  agencies Starter Accounting Vocabulary ● Assets (A) ○ Resources that a company has  ○ Anything you own or control that yields benefit to you  ○ NUMBER ONE ASSET IS CASH ● Liabilities (L) ○ Others/creditors’ claims on assets ○ Amounts owed to creditors [IOU] ● Stockholders Equity (SHE) ○ Owner’s claim on an asset ● Revenue (Rev) ○ Amount received for the sale of recorded goods/services ● Expenses (Exp) ○ Costs of providing or producing goods/services In its simplest form, Revenue minus Expenses equals Gross Income [Rev ­ Exp = GI] The Accounting Equation Assets equals Liabilities plus Stockholders Equity  A = L + SHE  ● Example: You purchase a car for $40,000 at a down payment of $4,000 ○ Car (A) = Bank Loan (L) + Your Down Payment (SHE) ○ $40,000 (A) = $36,000 (L) + $4,000 (SHE) Financial Statements ● Income Statement ○ Revenue ­ Expenses = Net Income ○ Rev ­ Exp = NI ● Statement of Stockholders Equity (stmt. of Δs)  ○ Common stock: most basic form of stock ○ Starting at common stock perspective ○ Retained Earnings (RE)   ● Balance Sheet (BS) ○ “Are we in balance?” ○ Assets = Liability + Equity ○ A = L + E ● Statement of Cash Flows (stmt. of CF) ○ Operating activity: Day­to­day expenses ○ Financing activity: Stock exchange, mostly stockholders, lenders, investors ○ Investment activity: Purchase of long term assets (like equipment, machinery, technology) *Dividends are not expenses 


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