AFM123 Lecture Notes - Lecture 1: Cash Flow, International Financial Reporting Standards, Legal Personality

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Document Summary

Owned by one person, easy setup, owner has full liability. More than one person, partners are personally liable for business debts. Separate legal entity, many regulations, not personally liable for debt. A system of tracking business activities and reporting it to decision makers (internal - management) (external - creditors and government: managerial accounting and organization. Detailed financials plans and reports about the operating performance: financial accounting. Used outside company by creditors, investors, etc. Basic accounting equations: resources owned by the company = resources owed to creditors and shareholders, assets = liabilities + shareholders equity, revenue - expenses = net income, assets. Resources controlled by the company, measurable value, expected to provide future benefit for company: liabilities, shareholders" equity. Amounts owed by the business to creditors. Contributed capital is the amount of owners directly invested in company for shares. Retained earnings is amount company has earned through profitable ops: revenue, expenses, dividends.

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