Textbook Notes (290,000)
CA (170,000)
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ACC 100 (200)
Chapter 1

ACC 100 Chapter Notes - Chapter 1: Cash Flow Statement, Retained Earnings, Deferral


Department
Accounting
Course Code
ACC 100
Professor
Else Grech
Chapter
1

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ACC100 Midterm #1 Notes
Chapter #1
Accounting is
oIdentifying
oMeasuring
oCommunicating
oGiving economic information to various users
Financial statements
oAre reports from management to external users which summarize how
the company performed during the period
oThey attempt to capture financial information about a company so
users can make informed decisions
Financial statements include:
oIncome statement
o Reports the results of operations for a specific period of time
(Revenues – Expenses = Net Income)
oStatement of Retained Earnings
Reports the changes in retained earnings for a specific period of
time (Previous Year’s Retained Earnings + Net Income –
Dividends = Current Year’s Retained Earnings)
oBalance Sheet
Reports the assets, liabilities, and shareholders’ equity as at a
specific point in time (Assets = Liabilities + Shareholders’
Equity)
oCash Flow Statement
Reports the cash receipts and payments for a specific period of
time (Operating Activities + Investing Activities – Financing
Activities = Net Change in Cash + Cash in the beginning of the
year = Cash at the end of the year)
Revenues:
oEarned when:

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Goods delivered
Service Provided
oExamples:
Sales
Interest Revenue
Fees earned
Commissions earned
Expenses:
oCosts of assets consumed or costs of services used up
oMust be matched to revenue they help to generate
oExamples:
Cost of goods sole
Rent expense
Insurance expense
Depreciation expense
Retained Earnings:
oAll the net income from prior years less all the dividends paid out in
prior years
oThe profit that is “retained” or kept within the business for future
growth
Assets:
oOwned by the company
oPhysical goods or legal right
oHas future economic benefit for the company
oExamples:
Cash
Accounts Receivable
Inventory

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Supplies
Prepaid Expenses
Equipment
Liabilities:
oOwed to outside parties
oDue at a future date
oPaid in cash, goods, or services
oExamples:
Accounts payable
Interest payable
Mortgage payable
Bank indebtness
Owner’s Equity (Shareholders’ Equity):
oOwed to shareholders
oMade up of:
Common shares
Retained earnings
oPaid out as dividends
Cash Flow:
oShows the cash receipts and cash payments for a period of time
oDivided into 3 types of activities
Order of the financial statements:
o1. Income Statement
o2. Statement of Retained Earnings
o3. Balance Sheet
o4. Cash Flow Statement
Forms of organization:
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