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by: Jada Rathbun

Chapter_1.pdf ACC 212 - 04

Jada Rathbun
GPA 3.026
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About this Document

These notes are over everything covered in Chapter 1.
Principles of Financial Accounting
David P Centers
Class Notes




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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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