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BUAD 280 Week 2 Notes

by: Manisha Malhotra

BUAD 280 Week 2 Notes BUAD 280

Manisha Malhotra
GPA 3.9
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About this Document

These notes cover Week 2 of Accounting
Introduction to Financial Accounting
Eric Allen
Class Notes




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This 2 page Class Notes was uploaded by Manisha Malhotra on Tuesday August 30, 2016. The Class Notes belongs to BUAD 280 at University of Southern California taught by Eric Allen in Fall 2016. Since its upload, it has received 18 views. For similar materials see Introduction to Financial Accounting in Business at University of Southern California.


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Date Created: 08/30/16
BUAD 280 Notes  (8/29) • asset ­ a future economic benefit  • 4 requirements to be an asset: 1. Acquired at a measurable cost (so we know how much we paid for it) 2. Acquired or controlled by the entity (the one we are making a financial statement for) 3. Expected to produce verifiable future economic benefits  4. Arise from a past transaction or event ex. $100 cash in checking account ex. spend $500 to produce a commercial (NOT AN ASSET, it is an expense) 1. future benefit = sales (paid $500) 2. control the commercial 3. not verifiable (not guaranteed money, hope it is gonna generate future     cash flows, uncertain about the amount of future sales) 4. spend $500 ex. pay $1,000 for next months rent (pre­paid rent) 1. future benefit = future use of building (acquired at a measurable cost) 2. paid rent (We control it) 3. use the building next month (verifiable because of lease/contract) 4. past transaction = paid $1,000 ex. purchase $10,000 worth of inventory 1. future benefit = future sales 2. acquired at a measurable cost 3. we control it, sitting in warehouse 4. verifiable  5. past transaction ­ purchase ex. bonds • asset because of interest payments and it is pre­paid so you are getting  access to cash flows Liabilities­ future economic sacrifice 1. Involve probable future economic sacrifices by the entity 2. The economic resource transfer is to another entity 3. The future sacrifice is a present obligation (owe on a certain date) (have an obligation      because of something that has already happened) arising from a past event ex. hire an employee to start work next week and going to be paid $600 a week 1. potential future economic sacrifice ­ $600 2. entity ­ employee 3. don’t owe $600 until they do work (no obligation to pay until the employee     performs the work) ex. receive $10,000 for work to begin next month (liability) (unearned revenue or       deferred revenue) 1. potential economic sacrifice ­ perform work  2. customer 3. past event ­ received cash 4. present obligation  ex. sign contract to perform $10,000 worth of work next month 1. does not pass number 3 (haven’t done the work yet) (haven’t performed the     work yet) 2. signing contract is not considered a past event  Stockholders Equity common stock/contributed capital ­ amount of cash or other assets the company  receives from its owners  end re ­ beg re + net income ­ dividends  • prepaid advertising ­ asset  • income taxes payable (owe something in the future)­ liability  • Accumulated Depreciation equipment ­ how much the equipment has been used over time  since we purchased it  • equipment ­ accumulated depreciation = net amount • current asset (happen within the next year)­ receive a future benefit within 1 year • current liability ­ make the economic sacrifice within 1 year • receivables and payables are always going to be current  • non­current assets ­ receive a future benefit within a year • non ­current liability ­ financial obligations listed on a company's balance sheet that are not  due within the present accounting year


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