Chapter_1.pdf ACC 212 - 04
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ACC 212 - 04
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This 3 page Class Notes was uploaded by Jada Rathbun on Sunday September 18, 2016. The Class Notes belongs to ACC 212 - 04 at Grand Valley State University taught by David P Centers in Fall 2016. Since its upload, it has received 33 views. For similar materials see Principles of Financial Accounting in Accounting at Grand Valley State University.
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Date Created: 09/18/16
Chapter 1 Sole Proprietorship o Business is owned by one person o Liable for all debt for the business o Easiest way to run a business Partnership o Owned by two or more people o Similar to sole proprietorship o More expensive than sole proprietorship o Advantage: more owners=more room for a company to expand (resources, liability, etc.) o Unlimited proprietorship Corporation o Opposite from partnership and sole proprietorship o Corporations are responsible for taxes o Owners with stock don’t lose more than invested o Can sell stocks in the company publicly or privately o Usually start as private companies and will branch into public companies o Legal separate entity o Can last forever Limited liability company o “other” type of company o Combines aspects from partnerships and corporations Accounting o Every organization needs an accountant o A system that takes down information (analyzing, recording, and summarizing) and reports how a business does to people who make decisions for the company. Managerial accounting reports o Reports taken to follow the performance of an operation o Internal with no rules Financial accounting reports o Financial statements o Records containing the financial state a company is in. Given to people not in the company/business. o Not detailed o Given to investors, creditors, directors, and government Creditors o Check balance sheets o Suppliers, bankers and who the company owes money to Investors o Existing and potential stockholders Directors o Aka members of the company’s board of directors o Decision makers that receive accounting reports Government (agencies) o The securities and exchange commission (SEC) o The internal revenue service (IRS) Basic accounting equation o A=L+SE o Resources of a company equals what is owed to stockholders and creditors Assets Resources that the company controls in order to create revenue and lower excess costs of economic resources Aka something that you own like cash Liabilities Resources given to a company that are to be owed to creditors Ex. Loans to the bank Stockholder’s equity = owner’s equity What is invested into a company Usually stockholders o Owner’s equity Revenue Money that comes in that you have sold (produce, service) Common stock Expenses Costs to run a business Ex. Utilities, damages to equipment Revenue + expenses = net income Revenue should be greater than net income Dividends Money a company gives to the stockholders Distributions of earnings Retained earnings Revenue increases retained earnings Expenses + dividends decrease retained earnings Earnings are contained in a business o Financial statements Income statements Lists revenues + expenses which shows net income Statement of retained earnings o Deals with retained earnings account Retained earnings o Beginning retained earnings o Add: Net Income o Subtract: Dividends o Ending retained earnings Example Title/Business Type of Statement Balance For the Month of __/__/____ Revenue X Total Revenue Expenses X Total Expenses Net Income sheet Assets Liabilities Stockholder’s Equity Statement of Cash Flow Set for a period of time Shows where cash is received and where it goes to o Order Statements Need to Be Done Income statement Statement of retained earnings Balance sheet Statement of cash flow
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