ACT 205 Lecture Notes - Lecture 8: Accounts Payable, Retained Earnings, Accounting Equation
Document Summary
They need info about the business and are not inside the business. ***for the purposes of this class, we will focus on external users. Three types of business organizations: sole proprietorships, single owner. The stock of the company is available for public to purchase on stock exchange. *for the purposes of this class, we will focus on corporations and publicly-traded corporations. Money from financing is used in investing activities. *the profit from the operating activities can then be used to buy more resources or returned to creditors and investors. *investors and creditors would like to know about. ***retained earnings is a necessary account to keep the accounting equation in balance. It shows how the company has been able to increase assets by making a profit. If assets increase, so must liabilities and/or stockholders" equity. If owners (stockholders) invest more cash into the company, assets increase because common stock increases.
