1. Borrowing: "Temporary financing"

- Bank Loan = Note payable

- Credit from suppliers = Account Payable

2. Selling Ownership Interest: "Permanent financing"

- Original investment by owners "common stock"

- Equity Ownership

Balance Sheet

Account Payable

 Money that the business has to pay back to its vendors or suppliers due to the credit purchase of goods and services.

- No formal agreement that can be traced back to invoices and bills.

-The business does not have to bear any interest on the same.

- "Short-term" which makes it a current liability.

Notes payable have a written agreement signed by two parties, the borrower and the lender, and are issued by a financial institution. 

- The formal contract states clearly the terms and conditions, such as the repayment schedule, principal amount, interest rate, date of maturity, etc. It is typically recorded and treated as a long-term liability since it is for more than a year.

Acquire resources used in the day-to-day operations. 

- Resources owned by or owed to the Company that will generate future economic benefit/interest.

Ex: Inventory, Building, Furniture & Fixtures, Equipment, Land, Vehicle, Cash (owed to), Accounts Receivable (owed to).

Balance Sheet

What your Company does every day.

Revenue as a result of delivering a product or performing a service.

+ Expenses

Income Statement

A payment that certain companies distribute to their stock investors.

Not an expense; therefore, not included on the income statement.

A document showcasing residual claims on a company's assets after liabilities are paid. 

- Debt that still needs to be paid.

Focuses on profit and liquidity.

- Investors (stockholders, owners)

- Creditors, suppliers, lenders (owed money)

- Government (IRS, SEC)

Focused on budget and planning.

- Managerial accounting

- Management

- CEO and CFO (Chief Financial Officer)

1. Income Statement

2. Retained Earnings Statement

3. Balance Sheet

4. Statement of Cash Flows

Income Statement

Revenue

- Expenses

=======

Net Income

Retained Earnings Statement

Beg. RE

+ Net Income

- Dividends

=======

Ending RE

Assets

--------

Cash                            XX

Accounts Receivable      XX

Inventory                     XX

===========

Total Assets   XX

- Shows the sources and uses of cash!

Liabilities

---------------

Accounts Payable         XX

Notes Payable              XX

===============

Total Liabilities     XX

SHE

------------

Common Stock        XX

Retained Earnings    XX

=================

Total SHE

- Cash

- Marketable Securities

- Accounts Receivable

* Allowance for Doubtful Accounts

- Supplies

- Inventory

- Prepaid Expenses

- LT Investments

- Land

- Buildings

- Equipment

- Furniture

*Accum. Depreciation (long-term asset being capitalized instead of expensed; Accumulation)

- Patents

- Copyright

- Trademark

It is used to track and report adjustments, reversals, or reductions in the value of assets or liabilities

- Offsets the balance of another account. 

- Ensures financial transparency.

- Accounts payable

- Accrued Expenses

- Wages Payable

- Taxes Payable

- Interest Payable

- Unearned Revenue

- ST (short-term) Notes Payable

Recorded on financial statements when they are incurred, not necessarily when they are paid. This approach provides a more accurate representation of a company's obligations.

- Financial Obligations that are recognized by the company before they are paid. 

- LT (long-term) Notes Payable

- Bonds Payable

- Mortgage Payable

- Contributed Capital

- Retained Earnings

- Sales Revenue

- Service Revenue

- Cost of goods sold

- Supplies Expense

- Wage Expense

- Utilities Expense

- Rent Expense

- Depreciation Expense

- Interest Expense

- Insurance Expense

* Dividends