BU127 Lecture Notes - Lecture 2: Financial Statement, Investment, Deferred Income
Lecture 2
Understanding the business
The players:
• Owners (or investors) provide startup money
o Looking for gain: sell ownership interest in the future (capital gains), or receive portion
of opay’s eaigs i ash (dividends)
• Creditors (often banks) provide additional money for business growth
o lend money to a company for a specific length of time and gain by charging interest on
money loaned
• Managers are responsible for daily operations
The Accounting System
Collects/processes financial info → reports info to decision makers → internal decision makers
→ external decision makers
Financial Accounting System:
Periodic financial statements and related disclosures → EXTERNAL decision makers
(creditors/investors/suppliers/customers)
Managerial Accounting System:
detailed plans and continuous performance reports → INTERNAL decisional makers (managers)
4 basic financial statements:
1) Statement of financial position
a. Repots aout of assets/liailities ad shaeholdes’ euity of an accounting entity at a
point in time
2) Statement of comprehensive income
a. Reports the revenues less the expenses of the accounting period
3) Statement of changes in equity
a. Reports the way that profit distribution of profit (dividends) and other changes to
shaeholdes’ euity affeted the fiaial positio of the opay duig aoutig
period
4) Statement of cash flows
a. Reports inflows (receipts) and outflows (payments) of cash during the accounting period
in the categories of operating, investing, and financing
The statement of financial position
assets:
-cash
-notes receivable
-inventory
-supplies
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BU127 Full Course Notes
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