Week 1 Notes
Week 1 Notes Accounting 2100
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This 2 page Class Notes was uploaded by Kyle Blanchard on Sunday October 4, 2015. The Class Notes belongs to Accounting 2100 at Western Michigan University taught by Caroline Burke in Fall 2015. Since its upload, it has received 30 views. For similar materials see Principles of Accounting I in Accounting at Western Michigan University.
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Date Created: 10/04/15
Accounting Notes Week 1 l Understand nature of business and the role of accounting a Accounting is the language of business i It39s the process business people use to communicate what they ve been doing b It is the Scorekeeping aspect of business i Business is a competition There is competition for 1 Customers employees pro ts and more 2 To be successful you need to understand the rules who keeps score and how it s kept 3 Keepscore could mean determining if a company made or lost money Using an income statement to be studied later 4 Accounting is the process of a Recognizing measuring recording and reporting information about the business39s transactions c De nition of a Business i Must have 3 elements 1 Be legal and comply with laws 2 Exchange products or services for money or money substitutes a There must be an exchange 3 Create value a Customers bene t from product b Owners get values from pro ts earned c Employees get their wages d Lenders can interest d Value i Risk is the uncertainty an outcome we don39t desire or expect could occur ll How a business operates a Resources needed nancing i Borrowing money 1 Liabilities are amounts owed to a lender or creditor ii Owners putting in their cash for a percentage of ownership 1 Owner39 or stockholders39 equity b Operating the business i Asset economic resource of the business ii Liability amounts owed to 3rd parties iii Equity portion of assets actually owned by stockholders 1 Common stock initial investment and retention of pro ts 2 Retained earnings business earnings that have been retained in the business lts affected by the following a Revenues b Expenses c Dividends c Use of account types to answer Q39s i We can make equations to answer if we39ve made a pro t net income 1 Revenuesexpenses net income VI a Income statement 2 A l E a Accounting equation b Same equation used for the balance sheet 3 We can expand the accounting equation to a A L revenuesexpenses dividends common stock Legal forms of businesses a Sole proprietorship i One owner b Partnership i 2 or more owners c Corporation i Separate legal entity Accounting principles and concepts a Financial accounting must follow GAAP i Makes it easier to compare companies ii Financial accounting standards board FASB Sets standards 1 Objective to make info useful for investing amp lending decisions iii Aids in making information more 1 Relevant 2 Reliable 3 Understandable Business entity principle Reliability principle Cost principle Revenue recognition principle Going concern principle International nancial reporting standards lFRS How accounting functions in a business a Cash accounting b Accrual accounting c Remember the accounting equation i A L SE d Accounting for business transactions Four Basic nancial statements lncome statement Statement of RE Balance sheet Statement of cash ows Headings on statements are listed as follows i Name of company ii Name of statement iii Descriptive date f Financial statement order and relationship 73919qu LO Duncp
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