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| DIFFERENCE BETWEEN FINANCIAL AND MANAGERIAL ACCOUNTING |
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| NOT FOR PROFIT- (Example?) |
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| Limited Liability of Stockholders |
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| Separation of Ownership and Management |
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| FAITHFUL REPRESENTATION PRINCIPLE |
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ASSETS-LIABILITIES
What is owned-what is owned
Stockholders are the owners= their equity= owner's equity |
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ACCOUNTING EQUATION:
FORMULA/ EXAMPLE
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BASIC TOOL OF ACCOUNTING
ECONOMIC RESOURCES=CLAIMS TO ECONOMIC RESOURCES
ASSETS=LIABILITIES+EQUITY |
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EQUITY: definition
COMMON STOCK
(DOWN) PAID IN CAPTIAL+RETAINED EARNINGS
(DOWN)
NET INCOME-DIVIDENDS
(DOWN)
REVENUES-EXPENSES. |
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Claim of a corporation owner's to the assets of its business.
Basic ownership in every corporation
Amount invested by its stockholders
Amount earned over time through income-producing activities and kept in use for the business
Distributions of retained earnings of a corporation to its stockholders. |
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GENERAL RULE WITH REVENUE AND EXPENSES
AFTER AFFECT: NET INCOME |
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NET INCOME
NET LOSS
DIVIDENDS
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| BEGINNING OF RETAINED EARNINGS[+/-] NET INCOME OR LOSS-DIVIDENDS=ENDING RETAINED EARNINGS |
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| An event that affects the position of the business or entity . Impacts at least two accounts for the assets category. Should be recorded reliably. |
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| On account, agrees to pay |
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| Increase cash, decrease in equity |
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Account payable and if item
Example= person buys supplies on account $500 within 30 days. |
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| Increase in liability and supply (asset=not cash because its an item ) |
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| Increase cash and retained earnings |
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CATEGORY UNDER ASSETS
INCREASE AR and Retained earnings |
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Expenses
Example: Payments (Bills, rent, salary charges) |
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| Decrease cash and retained earnings |
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Payment on account
Example: Business pays $300 on account. |
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| Decrease in cash and account payable |
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Collection money on account
Example: The business now collects $1000 from the cilent |
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| Increase in cash, decrease in amounts recieveable |
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Sells land/item
Example: Business sells some land at the sale price of $9000, this is equal to the cost of the land. They recieve the $9000. |
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| Increase in cash/decrease in item (land) |
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Dividend
Example: Business declares and pays the only stockholder $2000 cash. |
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Decrease in cash and retained earnings
- They do not affect net income or net loss |
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Statement of earnings for a period of time: quarter year or period.
-Summary of net income/loss revenue and expenses
Statement of operations |
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| Statement of retained earnings |
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Summary of the changes in retained earnings for a business entity at a certain time period.
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Lists a business assets, liabilities, and stockholder's equity on a specific date usually at the end of the year
- Snapshot of the entity
Statement of the financial position |
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| Reports of cash that are coming in or coming out during a time period. |
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Revenues- expenses
$ on first statement
List all then subtract
Find the total of total expenses and list on right side
Subtract all revenues with expenses
Net income/net loss value |
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| Statement of retained earnings |
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List retained earnings at ?/?? on right side
List net income from income statement
then add both
Subtract from value of dividends (list value on right side)=
Retained earnings at that date= final value underlined twice and on placed on right side |
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Assets on left side
Add values and indicate on right side=
Total assets= indicate value on right side
Right side [Liabilities and Stockholder's Equity]
List liabilities
List stockholder's equity on right side
Find the total equity first
Then add both liabilities and stockholder's equity to get total value
Must match with assets ;) |
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