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Describe the 4 major Financial Statements1.
Differentiate between Current and Long-Term Assets and Liabilities2.
Summarize the historical cost concept3.
Classify financial statement items within the appropriate account type
Recognize Income Statements, their components and formats5.
Identify Statement of Owner's Equity6.
Explain the three types of Cash Flows on the statement of cash flows7.
Discern and calculate Key Financial Statement Relationships
Build Income Statements and Balance Sheets9.
The economic resources owned by a business ASSETS1.
The debts owed by a business LIABILITIES2.
The amount of the owners investment in the business EQUITY3.
Portrayed at a specific point in time:i.
Thus commonly defined as the financial statement that describes the company's resources (assets)
and the claims again those resources by creditors (liabilities) and owners (equity)
Assets = Liabilities + Equity
Fundamental Accounting Equation
Accounts Receivable - represent amounts owed to the company by its customersb.
Inventory - the product the company sells to its customersc.
Supplies - items used in the normal course of business (not the same as inventory)d.
Current Assets - assets expected to either be converted into cash or expire (be used up) within
Item accumulated depreciation is included as a DECREASE of PPEiv.
Property-Plant-Equipment (PPE) - long-term assets that have a physical substance (can
touch, feel, see)
Intangibles - long-term assets that lack a physical substance (can't touch, feel, see)b.
assets expected to be used in business operations for longer
than one year
GAAP that states assets are to be shown on the balance sheet at their cost (amount
company paid for them)
Thus not shown on the balance sheet at current value nor are they adjusted over time
Historical Cost Concept3.
Balance Sheet (Statement of Financial Position)1.
Four Major Financial StatementsI.
Debts owed by the business and Represent creditor claims against the company's assets
Short-Term Notes Payable (Bank Loans)b.
Income Taxes Payabled.
Current Liabilities - liabilities expected to be paid within one year1.
Long-Term Notes Payablea.
Long-term Liabilities - debts that will be paid in longer than one year2.
Amount of owner investment
Components depend on type of organization
Contributed Capital (common stock)
represents investments made by owners into the
business through the purchase of the organizations' stock
Retained Earnings - represents net income earned by the corporation that is kept within
the company for growth and expansion (rather than given to the stockholders in the form
of a dividend)
Contributed Capital is investments made by owners into business
1. Financial Statements
Tuesday, January 10, 2017 10:03 AM
Unit 1 Page 1