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Chapter 1

ACTG 1P91 Chapter Notes - Chapter 1: Financial Statement, Income Statement, Retained Earnings


Department
Accounting
Course Code
ACTG 1P91
Professor
Linda Stillabower
Chapter
1

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Class #1! ! ACTG 1P91!September. 13th, 2011
Assets: resources available to the entity to generate more resources
Retained Earnings: earnings generated that the company has kept
Major Problem: Banks refuse to loan
Accounting: an information system designed to provide useful information to users for
decisions about allocation of scarce economic resources
Beginning Point -----------------------------------------------------------------> Ending Point
Balance Sheet!!!!!!!!Balance Sheet
Statement of Financial Position!!!!!!SFP
Statement of Cash Flows - Statement of Changes in Financial Position
Accounting is the process of capturing and reporting the results of a business’s
operating, investing, and financing activities.
Goodwill is only shown on the balance sheet only when a company is certain about the
$ amount
Financial statements are reports that summarize the financial results of business
activities.
Financial statement users are people who base their decisions, in part, on information
reported in a company’s financial statements.
Three main types of business activities:
Operating activities include day-to-day events involved in running the business.
Investing activities involve buying or selling long-term items such as land, buildings,
and equipment.
Financing activities involve raising money from lenders and owners or paying it back.
Different forms of Business Organization:
Sole proprietorships are business organizations owned by one person who is
personally liable for the debts of the business.
Partnerships are business organizations owned by two or more people. Each partner is
often personally liable for debts that the partnership cannot pay.
Corporations operate as business separate from their owners. Owners of corporations
(often called shareholders) are not personally responsible for debts of the corporation.
Public companies have their shares bought and sold on stock exchanges. (Private
companies’ shares are bought and sold privately.)
Financial Accounting focuses on preparing and using the the financial statements that
are made available by public companies to anyone who’s interested in reading them.
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