COMMERCE 1AA3 Lecture Notes - Lecture 1: Common Stock, Nonprofit Organization, Issued Shares

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Financial statements- are the business documents that companies use to report the result of their activities to various user groups. The system of accounting produces the following statements: income statement, statement of retained earnings, balance sheet, statement of cash flow. Also called the statement of operations of earnings. Report two main categories: revenue and gains. Gains are not as frequent: expenses and losses. Expenses are reduction in income from ongoing operations. Losses are reductions in income from peripheral operations. Hows the (cid:862)(cid:271)otto(cid:373) li(cid:374)e(cid:863: net income or net loss for the period. Net income is the most important item in the financial statements. Reports revenue and expenses: these are accounts are only reported on the income statement. If revenue exceeds expenses, company has net income. If expenses exceed revenues, company has net loss. Retained earnings is portion of net income company has kept over a period of years. Accumulated deficit indicates expenses have exceeded revenues.

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