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Lecture

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


Department
Accounting & Financial Management
Course Code
AFM123
Professor
Seth Bouwers

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Lecture 1: Chapter 1
Three main business activities:
1. Operating: Day-to-day events that occur when running a business (example:
Mattel manufactures and sells toys)
2. Financing: Exchange of money between a business and its lenders or
owners (ex: borrowing money from external lenders to help operate the
business)
3. Investing: Involves buying and selling long-lived assets (ex: buying
manufacturing equipment that will help the company earn future revenues)
Accounting is the process of capturing and reporting the results of a business’s
operating, financing, and investing activities.
Forms of business ownership: Sole proprietorship, partnership, and
corporations
Financial 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 future:
1. Balance 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 business) = Liabilities (Amounts owed by
the business) + Shareholder’s Equity (The amount invested in the business
by its owners)
2. Income 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 business) = Net Income

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3. Statement of Retained Earnings: Shows the amount of earnings that have
been retained in the business and the amount of the company’s 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 shareholders.
Beginning Retained Earning + Net Income – Dividends Declared =
Ending Retained Earnings
4. Statement of Cash Flows: Summarizes the business’s 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 sheet.
Relationship among the statements:
1. Net income flows from the Income Statements of the Statement of Retained
Earnings
2. Ending retained earnings flows to the Balance Sheet
3. Cash on the Balance Sheet and at the end of the year on the Statement of
Cash Flows agree
Assurance Statements: Two statements generally appear before the other
financial statements in the annual report:
1. The Management’s Statement of Responsibility for Financial Reporting
(which states that management is responsible for the integrity of the info
contained in the statements)
2. The Independent Auditor’s Report (which states that external accountants
have examined the statements and that they follow the rules of accounting)
Financial statement note types:
1. Accounting Policies: Describes the accounting decisions that were made
when preparing financial statements

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2. Contents Included: Presents additional detail about what is included in
certain financial statement account balances
3. Additional Information: Provides additional financial disclosures about
items not listed on the statements themselves
GAAP: Generally Accepted Accounting Principles (or CICA for Canadian
Institute of Chartered Accountants)
GAAS: Generally Accepted Auditing Standards
Lecture 2: Chapter 2
Current Assets: Used up or converted into cash within the next 12 months
Long-term Assets: Resources that will be used up or turned into cash more than
12 months after the balance sheet date
Current Liabilities: Debts and obligations that will be paid or settled within 12
months
Long-term Liabilities: Debts and obligations that will be paid or settled more than
12 months from the balance sheet date
Transaction: An exchange or event that has a direct economic impact on the
assets, liabilities, or shareholders` equity of a business
Conservatism: The requirement to use the least optimistic measures when
uncertainty exists about the value of an asset or liability
DECIDE (Does a transaction exist, Examine it for the accounts affected, Classify
each account as asset, liability or shareholder`s equity, Identify the direction and
amount of the effects, Ensure the basic accounting equation still balances)
Lecture 2: Chapter 3
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