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AC 210 week 1 notes

by: Conner Jones

AC 210 week 1 notes AC 210

Conner Jones
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lecture notes for AC 210 for the first week of class
Intro to Accounting
Lisa McKinney
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This 2 page Class Notes was uploaded by Conner Jones on Thursday August 25, 2016. The Class Notes belongs to AC 210 at University of Alabama - Tuscaloosa taught by Lisa McKinney in Fall 2016. Since its upload, it has received 223 views.


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Date Created: 08/25/16
AC 210 Notes August 23, 2016 Organizational forms  Sole proprietorship – you are the business, owner is liable for all debts of business  Partnership – a business or firm owned and run by two or more partners, owners are responsible for debt  LLC (limited liability company) – same as sole proprietorship or partnership except owners are separate from business, owners are not responsible for company’s debt The accounting system (three categories)  Operating activities – business of doing (selling, paying wages, etc.)  Investing activities – putting $ back into business (assets), like buying land or equipment  Financing activities – getting a loan from bank, selling stock Accounting reports  Financial reports – external users (creditors, investors, etc.)  Managerial reports – internal users (managers, supervisors, etc.) Equations  Assets = liabilities + stockholders’ equity  Resources owned (by company) = resources owed (to creditors/stockholders)  Net Income = revenues – expenses  End Retained earnings = beginning retained earnings + net income – dividends Terms:  Assets – economic resources controlled by company that have measurable value and are expected to benefit company in the future  Liabilities – measureable amounts that company owes to creditors o Notes payable – long term liabilities (bank, creditor) o Accounts payable – short term liabilities (supplier)  Stockholders equity – owners claim to business resource o Common stock – equity paid in by stockholder o Retained earnings – equity earned by the company (profits)  Revenues – sales of goods or services to customer (selling ice cream)  Expenses – costs of doing business necessary to earn revenues (advertising, wages, etc.)  Dividends – distributions of a company’s earnings to its stockholders as a return on their investment (comes from retained earnings) o Dividends are not an expense Four financial statements (typically in this order)  Income statement – statement of revenues, expenses, and net income (does start over each month) Revenue-Expenses=Net Income  Statement of retained earnings – statement of how dividends are divided between stockholders and retained earnings (beginning retained earnings + net income – dividends = end retained earnings) (does start over each month)  Balance sheet – reports at a point in time: what business owns (assets), what it owes its creditors (liabilities), what is left over for company’s stock (stockholders equity), assets = liabilities + stockholders’ equity (does not start over each month)  Statement of cash flow – summarizes how a business’s operating, investing, and financing activities caused its cash balance to change over time (does start over each month) August 25, 2016 Using financial statements  Creditors o is the company generating enough cash to make payments on his loans (may look at statement of cash flow)? o does the company have enough assets to cover its liabilities (may look at balance sheet)?  investors o what is the immediate return (through dividends) on my contributions (may look at statement of retained earnings)? o what is the long term return from the company’s statements (may look at income statement)? external financial reporting  main goal: provide useful financial information to external users for decision making  financial reporting must be: o comparable- have metrics for calculating  FASB (federal accounting standards board)- sets accounting standards using GAAP (generally accepted accounting principles) o verifiable- outside accountants verify the numbers o timely- must be reported on time o understandable- must be easily understood


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