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MGT120H5 Lecture Notes - Cash Flow Statement, Financial Statement, Income Statement

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Catherine Seguin

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Lecture 1
Jan 7,2014
Accounting Information in Decision Making
A Business
1. Owner & Creditors provide the funds
2. Funds used by managers of company to buy equipment, inventory and other assets
3. Managers develop plans and set goals (e.g. to make profit)
Financial Accounting
Purpose: to provide financial info for decision making. Financial statements summarize acting info
Financial Statements
Income Statements: revenue and expenses
Balance Sheet: assets, liabilities, and equity
Cash Flow: operating, investing and financing
Income Statement
Revenue: sale of product
Less: expenses – cost of running business (salaries, advertising, etc)
= Profit
Balance Sheet
Assets: things owned
Liabilities: what is owed to creditors
Equity: what is owed to owners
Cash Flow Statement
Operating, investing and financing activities  shows where cash came from and where spent
Users of accounting info
Primary: investors (buy company stock?) & creditors (loan to company?)
Accounting Equation
Assets = Liabilities + Owners Equity
(e.g. $50,000 car = $40,000 loan (creditor) + $10,000 (owner))
Cash = Loans + Investment
Cash = used to buy equipment, inventory, other assets
Investment = as business operates : + revenue - expenses
Shows financial position of
company @ point in time
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