Accounting 225, Week 1 Notes
Accounting 225, Week 1 Notes ACCT 225
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This 2 page Class Notes was uploaded by Taylor Hall on Friday August 26, 2016. The Class Notes belongs to ACCT 225 at University of South Carolina taught by Shannon D McCutchen in Fall 2016. Since its upload, it has received 122 views.
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Date Created: 08/26/16
Accounting 225: Chapter 1: For-profit Businesses/Publicly Traded Accounting: Information measurement system that identifies and communicates information that is relevant and reliable o General Types of Businesses: Sole-proprietorship: business is owned by one person Partnership: business is owned by two or more people Corporations: business is legally separate from its owners Limited liability of stockholders The taxes are doubled: o The net income is taxed o The dividend given to the stockholders are also taxed Publicly traded companies have to follow certain rules o Assets: resources, anything that you own or control that brings you a benefit o Liabilities: Others/creditors’ claims on assets; amounts owed to creditors (IOU) ex: bankers o Stockholders Equity: Owners claim on the asset o Revenue: amount recorded for goods/services sold o Expenses: costs for providing those goods/services Assets= Liabilities + Stockholders Equity Purchase car for 40,000$ and put down 4,000$ Car (40,000)= Bank (36,000) + Mine(4,000) Financial Statements: Must do these in order 1. Income Statement: Revenue – Expenses = Net Income 2. Statement of Stockholder’s Equity: a. Common Stock: b. Retained earnings: c. Common Stock + Retained Earnings = Stockholder’s Equity (Beginning CS + Issued CS) + (Beginning RE + Net Income – Dividends) = STE 3. Balance Sheet: Assets = Liabilities + Stockholder’s Equity 4. Statement of Cash Flows: measures activities involving cash receipts and cash payments over an interval of time a. Operating Activities: transactions that relate to the primary operations of the company b. Financial Activities: transactions the company has with investors and creditors c. Investment Activities: transactions involving the purchase and sale of resources that provide benefit for several years (like equipment) i. Long term assets: purchase and sale of equipment and other resources that last for more than a year Rules of Financial Accounting: o Generally Accepted Accounting Principles (GAAP): make formal standards Underlying assumptions Economic Entity: assume the business is separated from the owner Monetary Unit: Can assign monetary unit to transactions that do not involve cash Periodicity: can divide the life of the business into certain periods of time Going Concern: Assume that the business is going to continue o Securities and Exchange Commission (SEC) Financial Accounting Standards Board (FASB): governed by SEC United States follows these groups o International Accounting Standards Board (IASB) Global Auditors: Trained individuals hired by a company as an independent party to express a professional opinion of the extent to which financial statements are prepared in accordance with GAAP o Ensure that management has appropriately applied GAAP in financial statements o Help investors and creditors make decisions by adding credibility to financial statements Objectives of Financial Accounting: o Useful to investors and creditors in making decisions o Helps predict cash flows o Tells about economic resources, claims to resources, and changes in resources and claims Accounts Receivable: what other people owe you, it is considered an asset