ACC 131 Seipp Week 1 Lecture Notes: 8/20/15
ACC 131 Seipp Week 1 Lecture Notes: 8/20/15 ACC 131
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This 3 page Class Notes was uploaded by Daniel Hemenway on Saturday August 22, 2015. The Class Notes belongs to ACC 131 at Illinois State University taught by Edward Seipp in Summer 2015. Since its upload, it has received 82 views. For similar materials see Financial Accounting in Accounting at Illinois State University.
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Date Created: 08/22/15
A00 131 Notes 820 Chapter 1 Accounting and The Financial Statements A Businesses Forms Sole Proprietorship A business owned by one person Advantages They are easily formed The business itself does not pay taxes the owner pays the taxes at their own tax rate They are controlled by the owner Disadvantages The owner is liable for the company They have limited life Partnership A business that is owned jointly by two or more individuals The business itself pays no taxes the owners pay taxes Like a proprietorship a partnership provides increased access to financial resources as well as access to the individual skills of each of the partners They are accounting entities separate from the partners the partners are jointly responsible for all of the debt of the partnership Corporation A business organized under laws of a particular state Owned by one or more persons called stockholders ownership interests are represented by shares of stock Primary advantage the ability to raise large amounts of money capital by issuing shares of stock It is an artificial person and the stockholders responsibility for the debt of the business is limited solely to the amount they invested in it Disadvantages include it is more complex to form and they generally pay more taxes B Business Activities Financing Investing Operating MOST IMPORTANT Financing Activities include obtaining funds necessary to begin and operate a business Funds come from issuing stock or borrowing money The person whom the corporation owes money the creditor The obligation to repay a creditor is liability Claims of stockholders are called equity A00 131 Notes 820 The payable is for whoever borrowed the moneybought something The receivable is recorded by who lent out the moneysold something Investing Activities Buying assets like machinery land and buildings The purchase and sale of the assets that are used in operations are the company s investing activities Operating activities After acquiring assets that it needs the company can being to operate Revenue is the increase in assets that results from sale of products or services To earn revenue a corporation will incur various costs or expenses Expenses are costs of assets used or liabilities created in operation The results of a company s operating activities can be determined by comparing its revenue to its expenses If revenues are greater than its expenses then the company earned a net income If expenses are greater than its revenue then the company incurred a loss C Communicating of Accounting Information Detailed transactions are summarized and reported in a set of Financial Statements D Financial Statements Balance Sheets Reports the resources assets owned by a company and the claims owed against those resources at a specific point in time Income Statement Reports how well a company has performed its operations revenues expenses and income over a period of time Retained Earnings Statement Reports how much of the company s income was retained in the business and how much was distributed to owners over a period of time Statement of Cash Flows Reports the sources and uses of a company s cash over a period of time E Comparability of Financial Statements A common set of rules and conventions were developed to guide the preparation of financial statements ACC 131 Notes 820 These rules and conventions called Generally Accepted Accounting Principles GAAP were developed by several different organizations over a number of years In the US the Securities and Exchange Commission SEC has the power to set accounting rules for publicly traded companies However the SEC has delegated this authority to the Financial Accounting Standards Board FASB While the FASB is the primary accounting standard setter in the US it works closely with the International Accounting Standards Board IASB in development of the International Financial Reporting Standards IFRS F Fundamental Accounting Equation ASSETS LIABILITIES STOCKHOLDERS EQUITY Left side shows assets or economic resources of a company Right side shows who has a claim on the company s assets Liabilities are creditor claims Stockholders equity are owner claims