Textbook Notes (368,794)
Canada (162,165)
Commerce (1,696)
Chapter 1

Chapter 1 Accounting.docx

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Patricia Zima

Basic Business Activities:  Three main business activities:  Operating  Financing  Investing  Accounting:  The process of capturing and reporting the results of a business’s operating, financing and investing activities Operating Activities:  Day-to-day events that occur when running a business  Example:  Mattel manufacturers and sells toys Financing Activities:  Exchanges of money between a business and its lenders or owners  Example:  Borrowing money from external lenders to help operate the business Investing Activities:  Involves buying and selling long-lived assets  Example:  Buying manufacturing equipment that will help the company earn future revenues Reporting Financial Results  Financial results are reported in the financial statements  Balance Sheet  Income Statement  Statement of Retained Earnings  Statement of Cash Flows Financial Statement Set-Up  All contain different content; however,  All start with a heading that contains three parts:  Who: Name of business  What: Title of statement  When: Accounting period Balance Sheet:  Reports at a specific point in time  Like a snapshot of the company at on a specific date  Communicates what a business owns, owes and what is left over for the shareholders  The basic accounting equation is reflected: Assets = Liabilities + Shareholder’s Equity Components of a Balance Sheet:  Assets  Resources owned by a business  Liabilities  Amounts owed by the business  Shareholders’ Equity  The amount invested in the business by its owners Income Statement:  Reports if the business has made a profit from selling goods or services after subtracting the costs of doing bus
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