ACCT 001 Lecture Notes - Lecture 22: Accounting Equation, Financial Statement, Income Statement

• School: College of The Sequoias
• Department: Accounting (ACCT)
• Course: ACCT 001
• Professor: skaff

Document Summary

Elements of an accounting system: in order to prepare financial statements, transactions must be analyzed, recorded, and summarized using a framework. The accounting equation provides a starting point for designing such a framework. The accounting equation is expressed as follows: assets = liabilities + stockholders" equity, to illustrate an accounting system, we use an integrated financial statement approach. This approach facilitates analyzing, recording, and summarizing transactions by expanding the accounting equation. As illustrated on the next page, this approach reveals the points of articulation between financial statements, and establishes the balance sheet as the nexus among the basic financial statements. The integrated financial statement approach is a useful aid in analyzing the financial condition and changes in financial condition of a company. Specifically, the accounting equation ensures that total assets must equal total liabilities plus total stockholders" equity on the balance sheet.