ACC 342 Lecture Notes - Lecture 1: Financial Accounting Standards Board, Cash Flow Statement, Cash Cash
Accounting
System that collects and processes (analyzes, measures, and records) financial information about an
organization and reports that information to decision makers.
Accounting entity
Is the organization for with financial data are to be collected.
The four basic statements:
1. Balance Sheet
2. Income Statement
3. Statement of Retained Earnings
4. Statement of Cash flows
Balance Sheet
Reports the amount of assets, liabilities and stockholders' equity of an accounting entry at a point in
time.
Income Statement
Reports the revenues less the expenses of the accounting period.
Statement of Retained Earnings
Reports the way that net income and the distribution of dividends affected the financial position of the
company during the accounting period.
Statement of Cash Flows
Reports inflows and outflows of cash during the accounting period in the categories of operating,
investing, and financing.
Basic Accounting Equation
Assets = Liabilities + Stockholders' Equity
Assets
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Are the economic resources owned by the company. Each of these economic resources is expected to
provide future benefits to the firm.
Liabilities
Are the company's debts or obligations. Which will be paid with assets or services.
Stockholders' Equity (Owners' Equity)
Indicates the amount of financing provided by owners of the business and earnings. Is the sum of the
contribute capital + the retained earnings.
Accounting Period
Is the time period cover by the financial statements.
Elements of the Income Statement
Revenues, Expenses and Net Income.
Revenues
Earnings from the sale of goods or services to costumers. Revenues are reported whether or not have
yet been paid for.
Expenses
Represent the dollar amount of resources the entity used to earn revenue during the period.
Net Income ("the bottom line")
Is the excess of total revenues over total expenses.
Net Loss
If total expenses exceed total revenues.
Retained Earning Equation
Ending Retained Earnings = (Beginning of Retained Earnings + Net Income) - Dividends
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The Cash Flow Statement Equation
+/- Cash flow from Operating Activities (CFO)
+/- Cash flow from Investing Activities (CFI)
+/- Cash flow from Financing Activities (CFF)
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Change in Cash
Cash Flow from Operating Activities, and examples
CFO- Are cash flow that are directly related to earning income. Example, collecting cash from costumers,
pay salaries, pay bills, pay to suppliers.
Cash Flow from Investing Activities, and examples
CFI- Are cash flow related to the acquisition or sale of the company's productive assets. Example, the
purchase of additional equipment.
Cash Flow from Financing Activities, and examples
CFF- Are cash flow directly related to the financing of the enterprise itself. Example, the payment of
money to investors and creditors.
Notes
"Footnotes" provide supplemental information about the financial condition of a company.
GAAP
Generally Accepted Accounting Principles, are the measurement rules used to develop the information
in financial statements.
SEC
Security and Exchange Commission, is the U.S government agency that determines the financial
statements that public companies must provide to stockholders, and the rules that they must use in
producing those statements.
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Document Summary
System that collects and processes (analyzes, measures, and records) financial information about an organization and reports that information to decision makers. Is the organization for with financial data are to be collected. The four basic statements: balance sheet, income statement, statement of retained earnings, statement of cash flows. Reports the amount of assets, liabilities and stockholders" equity of an accounting entry at a point in time. Reports the revenues less the expenses of the accounting period. Reports the way that net income and the distribution of dividends affected the financial position of the company during the accounting period. Reports inflows and outflows of cash during the accounting period in the categories of operating, investing, and financing. Are the economic resources owned by the company. Each of these economic resources is expected to provide future benefits to the firm. Which will be paid with assets or services. Indicates the amount of financing provided by owners of the business and earnings.
