22107 Lecture Notes - Lecture 1: Retained Earnings, Matching Principle, Income Statement
Document Summary
Economic entity (keep records for bs, not personal use) Going concern (company will continue to operate in future: statement of comprehensive income. Total profit/loss goes to changes in equity to compute re. Revenues should be recorded when they are earned. Expenses are recorded in the same time they were incurred. For many assets, cost must be spread over periods used. State of financial position (what does the bs owe/own) A = l + oe (liability is an obligation of a bs) Cost principle: assets are recorded at their historical cost. Contributed capital: equity resulting from $ by investors: state of changes in equity. Changes in retained earnings over a specific period of time. = re, ending balance (this goes to balance sheet) The statement of changes in equity links the income statement and statement of financial position: cash flow statement. Ending cash balance = cash balance in financial position. Operating (cash received from customers, cash paid for interest)
