ARBUS102 - Pt.1 Mangement The course ARBUS 102 is split into two very distinct sections; accounting and management. This study contains all the lecture notes and powerpoint slides. As well, the entire textbook 'Accounting Information for Managers' is summ

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University of Waterloo
Accounting & Financial Management
AFM 123
Seth Bouwers

Lecture 1 Chapter 1Three main business activities1Operating Daytoday events that occur when running a business example Mattel manufactures and sells toys2Financing Exchange of money between a business and its lenders or owners ex borrowing money from external lenders to help operate the business3Investing Involves buying and selling longlived assets ex buying manufacturing equipment that will help the company earn future revenuesAccounting is the process of capturing and reporting the results of a businesss operating financing and investing activitiesForms of business ownership Sole proprietorship partnership and corporationsFinancial results are reported in the financial statements which are used to understand the current state of the business and predict how the business is likely to do in the future1Balance Sheet Reports at a specific point in time like a snapshot of the company on a specific date It communicates what the business owns owes and what is left over for shareholders Assets Resources owned by a businessLiabilities Amounts owed by the businessShareholders Equity The amount invested in the business by its owners2Income Statement Reports if the business has made a profit from selling goods or services after subtracting the costs of doing business it summarizes the results over a particular time period Revenues The price of goods sold or services rendered Expenses Costs of running the businessNet Income3Statement of Retained Earnings Shows the amount of earnings that have been retained in the business and the amount of the companys resources paid out to shareholders as dividends Dividends are reported on this statement and not on the income statement for they are not an expense but rather the distribution of profits to shareholdersBeginning Retained EarningNet IncomeDividends DeclaredEnding Retained Earnings4Statement of Cash Flows Summarizes the businesss operating financing and investing activities that caused its cash balance to change over a particular period of time The end of year cash balance is equal to the amount reported as cash on the balance sheetRelationship among the statements1Net income flows from the Income Statements of the Statement of Retained Earnings2Ending retained earnings flows to the Balance Sheet3Cash on the Balance Sheet and at the end of the year on the Statement of Cash Flows agreeAssurance Statements Two statements generally appear before the other financial statements in the annual report 1The Managements Statement of Responsibility for Financial Reporting which states that management is responsible for the integrity of the info contained in the statements 2The Independent Auditors Report which states that external accountants have examined the statements and that they follow the rules of accountingFinancial statement note types1Accounting Policies Describes the accounting decisions that were made when preparing financial statements
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