Financial Statements
Reports Assets, Liabilities, and Stockholder's Equity
Balance Sheet
What is the equation for the Balance Sheet
Assets=Liabilities+Stockholder's Equity
The measurement rules used to develop the information in the financial statements in the US
GAAP (Generally Accepted Accounting Principles)
What is Beginning Retained Earnings in year 1 of operations
0
Is the accounting equation balanced:
A=L+SE
(+)=(+) + (NE)
Yes
Reports revenues and expenses for the accounting period
Income Statement
What is the Income Statement Equation
Net Income=Revenues-Expenses
The US has the same reporting standards as the rest of the world
False (IFRS: International Financial Reporting Standards)
People primarily responsible for the information on the financial statements
Managers
Bought office equipment for $400,000. Paid half in cash and put the other half on account.
Equipment +400,000
Cash -200,000
AP +200,000
A=L+SE
(+)=(+)+NE
Reports how NI and distribution of dividends affected the financial position of the company for this accounting period
Statement of Retained Earnings
Beginning Retained Earnings+Net Income-Dividends=Ending Retained Earnings is the equation for what financial statement
Statement of Retained Earnings
The body that writes the rules
FASB (Financial Accounting Standards Board)
The balance sheet is different in that it reports at ____________
a point in time
When Revenues increase what happens to NI,RE, and SE
Increase
Reports inflows and outflows of cash during the accounting period
Statement of Cash Flows
What is the equation for the Statement of Cash Flows
Cash from Operations+Cash from Investing+Cash from Financing= Change in Cash
The body that approves the rules
PCAOB (Public Company Accounting Oversight Board)
Define Cost Principle
Record assets at their original cost on the transaction date
Incurred $3,000 in utilities for the month. Paid the full amount in cash.
Util. Exp +3,000
Cash -3,000
A =L+SE ERE=BRE+ NI- D. NI= R- E
(-)=(NE)+(-). (-)=(NE)+(-)-(NE). (-)=(NE)-(+)
Supplemental information about the financial condition of a company without which the financial statements can not be fully understood
Notes to the Financial Statements
In the first year of operations, Assets=10,000, Liabilities=2,000, Revenues=8,000, Expenses=2,000, Dividends=2,000. What is the amount reported in Contributed Capital?
$4,000
Federal agency with the power to determine the rules
SEC (Securities and Exchange Commission)
Revenues are recognized when earned, Expenses are recognized when incurred
Accrual Basis
Name the three steps in transaction analysis
1. Identify accounts affected
2. Determine effect on each account
3. Determine that accounting equation remains balanced