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by: Modesto Williamson


Modesto Williamson
GPA 3.9

C. Denstel

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C. Denstel
Class Notes
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This 12 page Class Notes was uploaded by Modesto Williamson on Tuesday October 13, 2015. The Class Notes belongs to ACCT 2000 at Louisiana State University taught by C. Denstel in Fall. Since its upload, it has received 53 views. For similar materials see /class/223047/acct-2000-louisiana-state-university in Accounting at Louisiana State University.




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Date Created: 10/13/15
Accounting 2000 Chapter 1 Class Notes Describe the primary forms of business organization Identify the users and uses of accounting information Explain the three principal types of business activity Describe the content and purpose of each of the financial statements Explain the meaning of assets liabilities and stockholders equity and state the basic accounting equation Describe the components that supplement the financial statements in an annual report UIhWNA an Forms of business organization NameDefinition Advantages Disadvantages Accounting is the information system that identifies records and communicates the economic events of an organization to interested users Users of accounting information two categories amp examples of each Type Examples Page 1 of 8 Accounting 2000 Chapter 1 Class Notes Effective financial reporting depends on sound Recent financial scandals led Congress to the pass the Sarbanes Oxley Act in 2002 Key Provisions Steps in Solving an Ethical Dilemma 1 Three types of business activities and examples of each Financing Activities Two primary sources of outside funds are 0 Party to whom amounts are owed are creditors 0 Notes payable and bonds payable are different type of liabilities 0 Payments to stockholders are called Investing Activities Purchase of resources a company needs in order to operate 0 Computers delivery trucks furniture buildings etc 0 Resources owned by a business are called Operating Activities Once a business has the assets it needs it can begin its operations 0 Amounts earned from the sale of products sales revenue service revenue and interest revenue 0 Inventory Goods available for sale to customers Page 2 of 8 Accounting 2000 Chapter 1 Class Notes 0 Right to receive money from a customerin the future as the result of a sale 0 cost of assets consumed or services used cost of goods sold selling marketing administrative interest and income taxes expense Liabilities arising from expenses include accounts payable interest payable wages payable sales taxes payable and income taxes payable 0 when revenues exceed expenses 0 when expenses exceed revenues Companies prepare 4 financial statements to communicate financial information to users Name Definition Components Date Page 3 of 8 Accounting 2000 Chapter1 Class Notes Illustration 14 SIERRA CORPORATION Income Statement For the Month Ended October 31 2012 Revenues Service revenue Expenses Salaries expense 5200 Supplies expense 1500 Rent expense 900 Insurance expense 50 Interest expense 50 Depreciation expense 40 Total expenses Net income 10600 7740 2860 Illustration 15 SIERRA CORPORATION Retained Earnings Statement For the Month Ended October 31 2012 I Retained earnings October 1 Add Net income Less Dividends Retained earnings October 31 Page 4 of 8 Accounting 2000 Chapter1 Class Notes Illustration 17 SIERRA CORPORATION Balance Sheet October 31 2012 Assets Cash at 15200 Accounts receivable 200 Supplies 1000 Prepaid insurance 550 Equipment net 4960 Total assets 21910 Liabilities and Stockholders Equity Liabilities Notes payable 5000 Accounts payable 2500 Salaries payable 1200 Unearned service revenue 800 Interest payable 50 Total liabilities 9550 Stockholders39 equity Common stock 10000 Retained earnings 2360 Total stockholders equity 12360 Total liabilities and stockholders39 equity 219l0 Illustration 18 SIERRA CORPORATION Statement of Cash Flows For the Month Ended October 31 2012 Cash Flows I39roxn npei39ating aclivities C Net cash proricletl by operating activities 5700 Cash Ilium from investing ueliiilies Purchased ol39l39ice equipment 5000 Net emh used by investing activities 5000 Cash Ilmt39s Irom nancing activities Issuance HI column sine I0000 Issued note p n a Ie 5000 Net cash provided by financing activities Ne39l increase in cusli Cnsit nt beginning of period Cash at end of pet iocl Page 5 of 8 Accounting 2000 Chamer1cmssNoms of the Annual Class Problems BE12 g den ti users Ufa ccountzng information 239 2 K Match each of the following types of evaluation with one of the listed users of accounting information M l Nt 9999 Trying to determine whether the company complied with tax laws Trying to determine whether the company can pay its obligations Trying to determine whether a marketing proposal will be cost effective Trying to determine whether the company39s net income will result in a stock price increase Trying to determine whether the company should employ debt or equity financing Investors in common stock Marketing managers Creditors Chief Financial Officer Intemal Revenue Service BE 16 Detern11ne proper fz39nan era Sta tement SO 4 5 K Eskimo Pie Corporation markets a broad range of frozen treats including its famous Eskimo Pie ice cream bars The following items were taken from a recent income statement and balance sheet In each case identify whether the item would appear on the balance sheet BS or income statement IS n39r39P anWPPrs Income tax expense Inventories Accounts payable Retained earnings Property plant and equipment Net sales Cost ofgoods sold Common stock Receivables Interest expense Page 6 of 8 P13B Accounting 2000 Chapter 1 Class Notes Prepare an Income sta temeut retained earnings sta temeut and balance sheet Izscuss results 330 4 5 AP Special Delivery was started on May 1 with an investment of 45000 cash Following are the assets and liabilities of the company on May 31 2012 and the revenues and expenses for the month of May its first month of operations Accounts receivable 6200 Notes payable 28000 Service revenue 10400 Salaries and wages expense 2000 Advertising expense 800 Equipment 56000 Accounts payable 2400 Maintenance and repairs expense 2900 Cash 15800 Insurance expense 400 No additional common stock was issued in May but a dividend of 1700 in cash was paid Instructions 8 Prepare an income statement and a retained earnings statement for the month of May and a balance sheet at May 31 2012 b Brie y discuss whether the company39s first month of operations was a success c Discuss the company39s decision to distribute a dividend SPECIAL DELIVERY Income Statement Page 7 of 8 Accounting 2000 Chapter 1 Class Notes SPECIAL DELIVERY Retained Earnings Statement SPECIAL DELIVERY Balance Sheet On your own Do it Page 18 Comprehensive Do it Page 2324 SelfTest Questions Pages 2526 Page 8 of 8 8292013 20500 PM Forms of a business org Proprietorship one owner simple to establish tax advantages Partnership simple shared ownership broader skills tax advantages Corporation easier to transfer ownership stocks easier to raise funds no personal liability Accountingnfo systems that id s records and shares econ events of an org to users internal HR fin mkt mgt or external users like tax authorities cust unions agencies creditors investors first 7 ch exam 1amp2 will be external usersfinancial accounting internal usersmanagerial accounting know what questions internal vs external users would ask Ethics in Financial Reporting SarbanesOxley Act 2002placed to protect external users and ensure ethical financial reporting All businesses have 3 types of activity and acct info system keeps track 1 financingwhen the business raises for itself o two main sources of external funds 0 borrowingamount is liabilies loaner is creditor notes and bonds are diff o issuing shares payment to stockholder is dividends 2 investingself investment inventory expansion technology etc o purchasing resources for operationsresources owned are assets 3 operatingday to day producing selling o revenue making o inventory goods available o accounts receivable right to receive in the future from a sale o expensescost of assets liabilitiesco pays outrises from expenses wages o net incomerevenues exceed expenses o net losswhen expenses exceed revenue FOUR IMPORTANT REPORTS Balance sheet Income statement Retained earnings Statement of cash flows Income statement must be done first how much we made how much we spent revenuesexpenses is a liability a type of expense Or are they separate tells us our performance for a time period past net income can predict future net income Retained earnings statement all pervious periods of profitshows growth o Dividends are paid from here 8292013 20500 PM 8292013 20500 PM


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