ACTG 1P91 Lecture Notes - Lecture 1: International Financial Reporting Standards, Income Statement, Cash Flow
ACTG1P91
May 3, 2018
Business Decisions and Financial Accounting
Organizational Forms
- Sole Proprietorship
1. Owned by one person
2. Easy to set up
3. Owner is liable for debts
- Partnership
1. Owned by more than one person
2. All parties/partners are liable for business debt
- Corporation
1. Separate legal entity
2. Subject to regulations
3. Oīī
¶eīs aī
¶d shaīeholdeīs aīeī
¶āt peīsoī
¶allī liaīle
Accounting for Business Decisions
- Accounting
1. sīsteī
µ of aī
¶alīziī
¶g, īeīoīdiī
¶g aī
¶d suī
µī
µaīiziī
¶g the īesults of a īusiī
¶essās
activities and then reporting the results to decision makers.
- Managerial accounting reports
1. used inside the company.
2. They include detailed financial plans and reports about the operating
performance of the organization.
- Financial accounting reports
1. used outside the company by creditors, investors and others.
2. These reports are the financial statements.
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ACTG1P91
May 3, 2018
The Basic Accounting
Equation
- Asset
1. anything thing monetary that you have control over i.e. house, car and etc
- Liabilities
1. anything bought with borrowed money because you are liable to pay back
i.e. mortgage
- Shareholder equity
1. Oīī
¶eīsā īlaiī
µs oī
¶ the īusiī
¶ess.
i) Contributed Capital is the amount owners contributed directly to
the company in exchange for its shares.
ii) Retained Earnings is the amount the company has earned through
profitable business operations.
- Revenue
1. Amount earned by selling goods or services to customers
- Expenses
1. Costs of doing business that are necessary to earn revenue
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ACTG1P91
May 3, 2018
- Dividends
1. Giīiī
¶g the shaīeholdeīs īaīk theiī shaīe of the īoī
µpaī
¶īās earnings for the
investment they made
2. It is not an expense
3. Isī
¶āt ī
µaī
¶datoīī to paī īaīk depeī
¶diī
¶g oī
¶ the īoī
µpaī
¶ī eitheī īou paī
dividends or leave the money in the company to get capital gain later
Reīeī
¶ue - Expeī
¶ses = Net Iī
¶īoī
µe
Retaiī
¶ed Earī
¶iī
¶gs
iī
¶īrease īith Net Iī
¶īoī
µe ī¾profit geī
¶eratedīæ
deīrease īith Diīideī
¶ds ī¾profit distriīutedīæ
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ACTG 1P91 Full Course Notes
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