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Management Core
MGCR 211
Julia Scott

CHAPTER 1 ASSETS = LIABILITIES + SHAREHOLDERS EQUITY CHANGE IN RETAINED EARNINGS = NET INCOME DIVIDENDS Debits on left & Credits on right Accounting Information system which records summarizes and reports the underlying economic conditions of an entity Used by both those inside the entity and outside to understand the entity. Used to make decisions Financial statements-management reports to owners. Basic Assets/Revenue/Expense 1. Revenue/liabilities/equity: Things that increase net earnings therefore increase retained earnings. Normally have Credit balances 2. Expenses/Assets: Things that decrease net earnings. Normally have Debit balances 3. Expenses - Product expense (COSG): match to revenue - Period expense (wages, insurance, etc.): match with the passage of time Revenues/Expenses vs. Gain/Loss 1. Expenses/Revenues: inflows/outflows from product you sell 2. Gain/Loss: assets or programs that are sold/bought for a profit when it is sold/bought for MORE than what is on the sheet. (ex. Securities for a product, trucks sold that were not needed anymore) Forms of Organizations 1. Sole Proprietor 2. Partnership 3. Corporation Corporate Organizations Shareholders buy stock & Elect board of directorsWho hire Management who run the company Types of Corporations 1. Small private 2. Large private 3. Large Public Equity 1. In corporation Shareholders equity (Investments by Shareholders in the form of Cash or Assets) Retained Earnings 1. Found on Statement of Retained Earnings 2. Income earned by the company and not paid out to the shareholders in dividends 3. What the company did with the income it make for the year. - Pay out to shareholders as dividends - Retain it in the company for future use 4. Balance Sheet: accounts are permanent the balances carry forward from year to year. St. of Earnings: Want to start from 0 every year. Need to reset accounts to 0. Retained earnings: Need to record Net Earnings in Retained Earnings. 5. Net Earnings = Revenues Expenses Annual Report Message to Shareholders, Corporate Profile, Financial Section (management statement of responsibility, audit report, financial statements) GAAP General Accepted Accounting Principles 1. Basic Principles of GAAP: - Accrual Accounting (revenues & expenses recognized based on performancenot when the cash flow occurs) - Revenue Recognition (revenue matched to period it was earned) - Matching (match expenses to revenues) 2. Set of accounting recommendations and guidelines used to prepare financial reports 3. Provides acceptable alternatives for recording, measuring, summarizing and reporting accounting transactions & info. 3 Areas in a Successful Business 1. Financial Decisions how do I pay for it? Where does the money go? 2. Investing Decisions What to make? What service to provide? What to buy? 3. Operating Decisions How do I handle credit? How quickly do I pay? Financial Statements 1. Statement of earnings 2. Statement of Retained Earnings (statement of changes in shareholders equity) 3. Balance Sheet (statement of financial position) 4. Statement of Cash Flows * Managers & Auditors Statement of Earnings1. Sales/Revenue 2. Cost of Goods sold 3. Gross profit or margin 4. Other expenses (depreciation, interest, SG&A, operating income) 5. Income before Taxes 6. Income taxes 7. Net earnings/income Balance Sheet (What is available to be spent) 1. What the company OWNS Assets (controlled by entity, future economic benefit to company, event that gave the company control has happened) - Cash, receivables, inventory, equipment 2. What the company OWES Liabilities - Payables, bank loans, mortgages 3. Who invested what Creditors and Shareholders - Share capital, retained earnings, dividends paid to shareholders/owners Accrual Accounting 1. Income statement based on the concept of Accrual Accounting (measuring performance) - When sal
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