FINANCIAL ACCOUNTING CHAPTER 1 ACG 2021

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Question Which is the Home Team Indiana Pacers Miami Heat

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Accounting Concepts & Principles Entity Assumption Going-Concern Assumption Historical Cost Principle Stable-Monetary-Unit Assumption

The Accounting Equation Assets = Liabilities + Stockholders Equity Assets = Liabilities + Paid in Capital + Retained Earnings Assets = Liabilities + Paid in Capital (+ Revenue – Expenses – Dividends) Assets + Expenses + Dividends = Liabilities + Paid in Capital + Revenue

The Financial Statements

Income Statement Also Known As:  Statement of Operations Measures:  Net Income  Net Earnings  Net Profit or Loss  Revenues – Expenses Time Period  During a specific period of time (arbitrary cutoff dates) Monthly Quarterly Annually

Statement of Retained Earnings How did a company use it’s Earnings  Paid out in Dividends  Reduces retained earnings since earnings are leaving the company in the form of dividends to owners  Retained for Re-investment  Increases retained earnings

Balance Sheet Also Known As:  Statement of Financial Position Measures:  Assets  Resources of a business  Liabilities  Amounts business owes to others  Stockholders Equity  Paid in Capital Amount invested by shareholders  Retained Earnings Time Period  A single point in time – A Snapshot of the Corporation

Cash Flow Statement Most Important Statement! What did the company do to:  Generate Cash  Spend Cash Examines 3 Aspects of Cash Creation/Use  Operating  Investing  Financing

Assets Liabilities & Equity Cash Accounts Receivables Inventory Short term investments Prepaid Assets Supplies Land Property, Plant & Equipment Accounts Payable Other Payables Long-tern Payables  Notes Payable  Bonds Common Stock Retained Earnings  Beg Retained Earnings  + Revenue  - Expenses  - Dividends Accounts