AFM123 jan 9.docx

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Accounting & Financial Management
AFM 123
Robert Sproule

AFM/ARBUS 102 Ch. 1: Business Decisions -Organizational Forms 1) Sole proprietorship: business owned by 1 person; easy to setup; owner is liable for business debts 2) Partnership: owned by more than 1 person; partners are personally liable 3) Corporation: a separate legal entity; often subject to many regulations; owners are not personally liable for business debts Accounting: 1) Managerial – reports used inside the company “run the company” -operating performance of the organization 2) Financial – reports used outside company by creditors, investors & others - financial statements - “evaluate the company” Assets = Liabilities (amounts owed by the business to creditors)+ Shareholder’s Equity (owner’s claims on the business resources: 1) contributed capital – owner’s direct investment 2) retained earnings – amount the company has earned through profitable business operations) Revenue (amount earned) – Expenses (costs) = Net income Dividends: distribution of a company’s earnings to its shareholders as a return on their investment   NOT AN EXPENSE! Retained Earnings: -increase with net income (profit generated) -decrease with dividends (profit distributed) Financial Statement: 1)income statement reports the amount of revenues – expenses over a period of time 2)statement of retained earnings reports the way that net income and the distribution of dividends affected the financial position of the company during a period of time 3)balance sheet reports the amount of assets, liabilities and shareholder’s equity of a business at a point in time 4)statements of cash flows reports the operating, investing, and financial activities that caused increases and decreases in cash during a peri
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