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Exam Notes for Accounting.docx

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University of Ottawa
Breid Mc Ilkenny

Chapter 1When a company uses its operating line of credit to cover cash shortfalls and overdraws its bank account it results in a liability called bank indebtedness Mining equipment computers vehicles buildings and land are all examples of longlived assets that result from investing activities property plant and equipment Different Types of Statements1 Income statement An income statement reports revenues and expenses to show how successfully a company performed during a period of time 2 Statement of changes in equity A statement of changes in equity shows the changes in each component of shareholders equity as well as total equity during a period of time3 Statement of Financial Position A statement of financial position presents a picture of what a company owns its assets what it owes its liabilities and its net worth its shareholders equity at a specific point in time 4 Statement of cash flows A statement of cash floows shows where a company obtained cash during a period of time and how that cash was used Quick Fact Amounts received from issuing shares are not revenues and amounts paid out as dividends are not expenses If retained earnings are negativethat is there have been more losses than profitsit is known as a deficit Relationships between the statements 1 Statement of changes in equity depends in part on the results of the income statement Profit is added to the beginning amount of retained earnings as part of the process of determining ending retained earnings 2 Statement of financial position and statement of changes in equity are interrelated because the ending balances of each component of shareholders equitycommon shares 10000 and retained earnings 142as well as total shareholders equity of 101423 Statement of cash flows and the statement of financial position are also interrelatedStatement of cash flows shows how the cash account changed during the period by stating the amount of cash at the beginning of the period the sources and uses of cash during the period and the amount of cash at the end of the period
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