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Canada (509,690)
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ACC 110 (74)


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ACC 110
Marla Spergel

Accounting Chapter 2 Notes Fiscal year: 12 month period which an entity provides information Assets - Economic resources, for carrying out its business activities, that provides future benefits to an entity - Controlled by the entity that will obtain the benefits (right to use the asset to make money) - Result of a transaction or event that has already occurred - Measurable Liability - Obligations an entity has to pay debt or provide goods or services - Result of past transaction or economic event - Require some kind of economic sacrifice to settle - Entity’s obligations to pay money or provide goods, or service to suppliers, lenders, customers, and government Owner’s Equity - The investment the owners of an entity have made in the entity. - Shareholder’s equity: owner’s equity of a corporation - Partner’s equity: owner’s equity of a partnership - Common shares: Reflects the amount of money that shareholders have contributed to the corporation in exchange for shares - Retained Earnings: Sum of all the net incomes a corporation has earned - Dividends: Payments, usually in cash by a corporation to its shareholder. *if Retained earnings is negative then referred as deficit Expense - Economic sacrifices can be the result of using up an asset or incurring a liability. Expenses result in a decrease in owner’s equity. Revenue/(Sales) - Economic benefits earned by providing goods or services to customers. Revenue results in an increase of owner’s equity Capital Asset - Property - Plant - Equipment - Intangible asset Current Assets - Converted into cash within one year Non-Current Asset - Extended beyond one year Current Liabilities - Paid within a year Non-Current Liabilities - Paid beyond a year *Asset = Liabilities + Owner’s Equity Operating Cycle: the time it takes from the initial investment made in goods and services until cash is received from customers Liquidity: Ability to convert assets to cash Working Capital =Current asset – Current liabilities Current Ratio = Current Asset ÷Current Liabilities - Current assets to pay off current liabilities Debit-to-Equity Ratio = Liabilities ÷ Shareholder’s equity - How an entity is financed - Higher ratio = more debts -Interest: Cost of borrowing money
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