MGMT 1A Lecture Notes - Lecture 1: Deferral, Cash Flow, Financial Statement
Document Summary
Revenue: you recognize the revenue when it is earned. Expenses: matching the expenses to the period of benefits and revenue it generates. Inventory is an asset you increase assets with debit so you increase inventory with debit. They are also assets, so you increase them with debit and decrease with credit. Liabilities can be decreased with debit and increased with credit. It is the equity the owner"s own if they sell out the assets and increase their liabilities. They make a down payment of ,000 and take out a loan of ,000. This is how their equity breaks down: Assets= ,000,000, the total value of the house. Liability= ,00, the money that they owe. Equity= assets - liability, so ,000,00 - ,000 equals ,000. Equity is increased with credit and decreased with debit. When recording transactions, debit has to equal credit, has to balance. 4th financial statement: cash flows, the flow of cash.
