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Lecture 1

BU127 Lecture Notes - Lecture 1: International Financial Reporting Standards, Retained Earnings, Investment

Course Code
Michael Nijhawan

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The founder also functioned as manager of the business ( owner-manager)
Creditors: local bank and other lenders
Individuals who buy small percentages of large corporations are called investors.
They expect to receive a portion of what the company earns in the form of cash payments called
The exchange of money between SUN and its lenders and owners are called financing activities.
Purchases or sales of property called investing activities
Sun purchases ingredients and accessories called suppliers
Sun managers is internal decision makers and parties outsides the firm is decision
makers( investors in sun shares and bank’s loan officer_
Developing accounting information for internal decision makers is called managerial or
management accounting.
The focus of this text is accounting for external decision makers, called finnancial accounting.
The four basic financial statements: the statement of financial position, the statement of
comprehensive income, the statement of changes in equity, the statement of cash flows
The organization for which financial data are to be collected and reported is called an accounting
Financing provided by creditors ceates a liability.
Dinancing provided by owners creates owners equity
Statement of financial position : assets=liabilities + shareholder equity
Assets: cash, land, plant and equipment,
Advance payment of any insurance premiums give rise to prepayments\
Began making its fruit beverage led to the value assigned to inventories.
Sell product and receives promises to pay called trade receivables which are collected in cash
Good will” customer loyalty, quality products
Liabilities:Trade payables arises from the purchase of goods and services from suppliers on credit.
Short-term borrowings provisions are estimated amounts payable in the future, long-term
Shareholders’ equlity indicates the amount of financing provided by owners of the business, as
well as earning overtime. Arises from 1 contributed capital, retained earning or the amount of
earnings reinvested in the business3 other components.
The statement of comprehensive income reports the change in share- holders’ equity during a
period from business activities other than investment by shareholders
The time period covered by the financial statements is called an accounting period.
Revenues- expenses=net earnings
The statement of changes in equity reports all changes to shareholders’ equity during the
accounting period.
Retained earnings reflect the net earnings that have been generated since the creation of the
company but not distributed yet to shareholders as dividends
The statement of cash flows reports cash inflows and outflows that are related to operating,
investing and financing activities during the accounting period.
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