Chapter 1-4 Note
Chapter 1-4 Note Acct 102
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This 7 page Class Notes was uploaded by Phuong Tran on Saturday September 12, 2015. The Class Notes belongs to Acct 102 at North Dakota State University taught by Grothe in Fall 2015. Since its upload, it has received 49 views. For similar materials see Fundamental of Accounting in Accounting at North Dakota State University.
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Date Created: 09/12/15
Wednesday August 5 21115 111 AM 0 Purpose of Accounting 0 Identify measure record and communicate financial information I Accounting vs bookkeeping 0 Role of accounting 0 Communicate useful information 0 Summarize financial performance 0 Business Purpose 0 For profit I In business to make money I ConsumergtBusinessgtOwner 0 Non for profit I Not to make money for themselves instead they make money for an organizations cause or religion I Consumer gt Business gtCost of running the organization 0 Who are Stakeholder 0 Capital Markets I Owners and investors andor creditors III Groups of people who lends money to fuel business III Creditors loads money and expects all of it payed back and sometimes interest are put on the original amount III Owners investors loads money in return for a profit made 0 Marketplace I Consumers and suppliers 0 Government I Worried about taxes and lay off I If large lay off happens government have to pay those an unemployment welfare 0 Internal I Employees and managers 0 Financial accounting 0 GAAP I Generally accepted accounting principles III Developed by the financial accounting standards board FASB III Private organization but backed up by the US government 0 Securities and exchange commission I Has authority over publicly traded companies III High standard for companies that trade publicly 0 Business entity concept 0 A business is separate from its owners I Transactions must be recorded separately to accurately reflect the business39 financial status 1 Example 0 Partner A uses the business39 money to pay his personal property taxes Do the financial statements show the business true express 0 No because partner a39s personal property is included 0 Accounting equation The left side of the accounting equation shows the assets or economic resources of a company Liabilities money andor assets that must be payed back to our creditors Stockholder39s Equity Any money goes to our owner andor investors Accounting Page 1 I Assets Liabilities stockholders39 equity What are financial statements 0 What are financial statements 0 Tools for communicating O Summarize transactions 0 Reports for a specific period in time 0 Types of Financial states 0 Income statement I How much money the business I How much money was spent 0 statement of changes in stockholders39 equity 0 Balance sheet I Every owned and own I More detailed version of accounting equation 0 Statement of cash flow I One of the more important I How money is being spent or when it is coming in Accounting Page 2 39Monday Auust 31 2015 1130 AM 0 Reliability Concept 0 Accounting records must be based on verifiable data I Verifiable data a type of data that is hard copy to verify spending 0 Historical Cost Concept 0 Accounting records show assets at their original cost I Example III John paid 30000 for his delivery truck but later saw one advertised online for 50000 How should the truck be recorded on his book 0 30000 Because it39s the original cost 0 Accounting Transactions 0 A transactions is an economic event that can affects items in the financial statements 0 Rules such GAAP determine What When How 0 Trasactions are to be recorder Transactions are to be recorded Transcation 0 What to Record O In order to be recorded a transaction must I Have an impact on the financial statements and I Be measurable can39t be record it now and numbers can39t be guessed 0 Transaction Analysis 0 Process of determine the effects of a transaction on the elements of the accounting equa on I Transcation analysis involves three step 1 Write down the accounting equation 2 Identify the financial statement elements that are affected by the transaction 3 Determine whether the elements increased or decreased 0 Acquiring Assets 0 Examples I Issuing 300 of stock I Taking out a 200 loan I Selling 120 in delivery service 0 Assume dealing with cash unless otherwise stated Assets Account Titles Cash 0 300 200 0 Exchanging assets 0 Trading one assets for another I Paid 250 for equiment I Paid 50 for supplies I Returing 15 of supplies for a cash refund Accounting Page 3 Assets Equipment Supplies Stocker holder39s equality Account Titles saoo 300 200 120 120 Revenue 250 250 Equipment 65m 50 15 15 0 Using assets 0 Examples I Paying 25 I Paying back on a 150 I Paying a 50 dividend to Shareholders I Using 20 of supplies Assets Equipmen Supplies Liabilities Stocker holder39s Stocker Account t equality holer Titles Stock Ret Earning Cash Notes payable 300 300 200 200 120 120 Revenue 250 250 Equipment 550 50 15 15 150 150 25 25 Expense 50 50 Dividend 20 20 Expense 0 Double entry accounting 0 Double entry accounting describes the system used to record the effects of transactions on the accounting equation 0 Under double entry accounting In Class Exercise Assets Equipment Supplies Liabilities Stock Holders Equity AccountingTitles Note Payable Common Stock Ret Earning 800 800 1000 1000 Note Payable Accounting Page 4 Accounting Page 5 Financial Statements Wednesday September 2 2015 1125 AM Income Statement Elements wo major elements I Revenues and expense I Revenues money made from providing a service or a product I Expense moneym on resource 0 Revenues are the increase in assets that results from sales 0 Expense are the cost of resources used tto earn revenues during a period Why is the income statement important 0 Reports the results a company s operation for a given period 0 Long term survival ofa company depends on its ability to produce net income Statement of stockholders epualig 0 Owner contributes capital in two ways I Directly though purchases of common stock I Indirectly by the company retaining net income 0 Net income earned but not paid out in the form ofdividends is called retained earnings Why is the statement of stockholders epuity important 0 Used to monitor and evaluate a company39s dividend payouts and retained earnings 0 Creditors are interested in a company s dividend payouts in case company won t have enough cash left to pay its debts Why is the balance sheet important 0 Reports what are sources company has and how it obtained those resources 0 Potential creditors and owners ar interested existin claims Why is the statement of cash flows important 0 Shows where a business gets its cash and spends its cash 0 Helps to answer the question ofwhether a business has enough cash to pay its biII Financing activities 0 Any process of being assets to the business and any activity that involves our Revenues Expens Net Income Loss Beginning SE Stock Changes net income loss Dividends Grahame nt nf stockholder s Snow Service Company Statement ofStockholder s Equity Year Ended December 31 2011 Beginning Common Stock 0 Plus Stock Issues 9000 Ending Common Stock 9000 Beginning Retained Earning 0 Plus Net Income 1100 Loss Dividends 500 Ending Retained Earning Total Stock Holder s equilty 9 600 Snow Service Comay Balance Sheet December 31 2011 Assets Cash 14600 Total Assets 14 600 Liabilities Notes Payable 5000 Stockholder s equility Common Stock 9000 Retained earning 600 Total Stockholder equity 9600 Total liabilities stockholder equity 14 600 i H Snow Services Compay Statement of cash flow Year ended December 312011 Cash Flows from Operating Activities Cash Receipts from reveune 4000 Cash Payment from expense 1 900 Net Cash flows from operating activities 11000 Cash Flows from Investing Activities Cash Flows from Financing Activities Cash Receipts from Issuing Stock 9000 Cash Receipts from borrowing 5000 Cash payment for Dividends 500 Net Cash Flows from Financing Activities 14600 Net Increased in Cash Plus Beginning Cash Balance 0 Ending cash blance 14 600 Accounting Page 6 creditors andor stockholders Issuing stock Class activity Borrowing money 0 Furniture purchase I Paying dividends 39 lnveStinE Repaying loans 0 Paper purchase Investing activities I Operating 0 Acquiring assets to operate 3 50111 Store BUIldlng I Buyingselling building and orland 39 anEStlng I Buying Selling an big assets for operating 0 MONEY bOI39I39OWed Operating activities Financing 0 Generating revenues 0 Clothes sales 0 Incurring expenses operating 0 Owner Contributed cash I Financing Assets Liabilities Stockholder Rev Exp Net Income Cash Note Payable Common stock Ret Earing 0 0 0 0 0 0 9000 9000 0 0 5000 5000 0 0 4000 4000 4000 0 4000 2900 2900 0 2900 2900 500 500 0 0 Total 14600 Total5000 Total9000 600 Totalz4000 Total 29000 Total 11000 Snow Service Company Income Statement Year Ended Decemeber 31 2011 Reveune 4000 Operating Expense Wage Expesne 2 900 Net Income 1 090 Statement of Cash Flow Accounting 9000F 5000F 40000 2900o 500 F 14600 NC Wage expense Dvide nds Assets Liabilite 5 Cash Note Payable 1460 5000 0 4500 2000 2000 I I 6700 4300 700 Total Total 2310 3000 0 Snow Service Company Income Statement Year Ended December 31 2012 annmln lt6 mm Operating Expense Wage Funanlta lt4 3m Net Income 2400 Snow Service Company Statement OfStockhoIder s Equity Year Ended December 31 2012 Beginning Common Stock 9000 Plus Stock Issues 4500 Ending Common Stock 13500 Beginning Retained Earning 600 Plus Net Income 3500 Loss Dividends 700 Ending Retained Earning 2 Total Stockholders Equity 13500 Stockholders Common Stock 9000 4 5000 Total 13500 Ret Earning 600 6700 4300 700 Total 2300 4000 6700 0 Total 10700 Exp 2900 4300 Total 7200 income 1 100 6700 4300 Total 3500 Statem Accoun ent of ting Cash titles Flow 1460 0 NC 4500 f 52000 f 6700 0 4300 Wage o expe ns e 700 Dividen ds Total 26600 Accural Accounting Friday September 11 2 15 112 AM 0 Adjustments 0 To recognize revenue earned and match expense to revenue 0 Made at the end of a period to ensure accurate financial statement 0 Types of adjustments 0 Accrued revenue 0 Accrued expense 0 Earned deferred revenue Prepaid deferred expense 0 Accrued Revenues O Goods or services provided but money not received 0 Adjustment is I Increase assetsaccounting receivable I Increase stockolder39s equity retained earnings for revenue 0 Assets Liablitie Commo Ret Revenu Expens Net Statem s nstock Earning e e income entof cash flow Accounting Page 7
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