ACCTG300 Study Guide - Winter 2018, Comprehensive Midterm Notes - Income Statement, Balance Sheet, Current Liability
12 Oct 2018
School
Department
Course
Professor
ACCTG300
MIDTERM EXAM
STUDY GUIDE
Fall 2018
Chapter 1: The Purpose and Use of Financial Statements
Who Uses Accounting Information?
accounting identifies and records the economic events of an organization and communicates
this information to interested users
two broad categories of users:
1. internal - managers, employees, etc.
2. external - investors, creditors, CRA, customers, etc.
want to know how to use funds collected
some of the information internal get is more detailed - but not everyone, need authorization to
receive
CRA - Canadian revenue agency
Financial and Managerial?
Legal Forms of Business
Sole proprietorship:
owned by one person
include on personal income tax return, no legal return
Partnership:
owned by more than one person but not incorporated
file on personal income tax return
Corporation
separate legal entity having ownership held by shareholders
separate tax return for it
may be a public or private corporation - public means have shares in the stock market
•shareholders - therefore shares that are issued
may be a for-profit or not-for-profit organization
Types of Business Activities
Financing:
Financial
Managerial
external users
internal users
rigid rules
flexible format - however the company wants to
prepare it
historical perspective - past records
future perspective - prospective budgets, sales
aggregate information - summarized
detailed information - from a management
perspective
quantitative information
quantitative and qualitative information - how were
the numbers arrived at, and why (ex. why a 10%
increase in sales?)
find more resources at oneclass.com
find more resources at oneclass.com
obtaining (and repaying) funds to finance the operations of the business
usually long-term liabilities or shareholders’/owners’ equity are related to financing (debt or
equity)
long term, going to pay over a number of years
liability - debt
equity - shareholders that invested the money
Investing:
obtaining the resources or assets needed to operate the business for the long term
usually long-term assets - investments or property, plant, and equipment
got the money and spent it on something for the business
Operating:
the main day-to-say activities of the business
usually current assets and current liabilities - cash, AR, AP, etc.
Financial Statements
Balance Sheet (also called Statement of Financial Position):
assets, liabilities, and shareholders’ equity as at a specific point in time
shows things that you own or owe
bank account, it should balance
Income Statement (also called Statement of Earnings):
usually called Statement of Operations if you are losing money
results of operations (revenue and expenses) for a specific period of time
shows what has happened in a period of time, usually for the year
Statement of Cash Flows
how a company obtained cash and how cash was used for specific period of time
where did it get cash from and where did it go
only shows what you physically have
Statement of Retained Earnings (also called Statement of Changes in Equity for IFRS
companies):
changes in each component of equity for a specific period of time
in Canada there are two ways to prepare statements: IFRS for mostly publicly traded companies
if not publicly traded can use ASPE
Income Statement
revenue - arise from the sale of a product or service
•what money have the earned
expenses - costs of assets consumed or services used to generate revenues
if you’re selling a product need to include the cost of creating the product
net both numbers to come up with the net earnings
net earnings (loss) = revenues minus expenses
for a period of time
measures gains and losses
Statement of Retained Earnings
shows the changes in retained earnings for the period
find more resources at oneclass.com
find more resources at oneclass.com
