Textbook Notes (359,448)
Canada (156,281)
Accounting (526)
ACC 100 (209)
Else Grech (70)
Chapter 1

Chapters 1 to 3

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School
Ryerson University
Department
Accounting
Course
ACC 100
Professor
Else Grech
Semester
Fall

Description
ACC100 Midterm #1 Notes Chapter #1 • Accounting is o Identifying o Measuring o Communicating o Giving economic information to various users • Financial statements o Are reports from management to external users which summarize how the company performed during the period o They attempt to capture financial information about a company so users can make informed decisions • Financial statements include: o Income statement o Reports the results of operations for a specific period of time (Revenues – Expenses = Net Income) o Statement 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) o Balance Sheet  Reports the assets, liabilities, and shareholders’ equity as at a specific point in time (Assets = Liabilities + Shareholders’ Equity) o Cash 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: o Earned when:  Goods delivered  Service Provided o Examples:  Sales  Interest Revenue  Fees earned  Commissions earned • Expenses: o Costs of assets consumed or costs of services used up o Must be matched to revenue they help to generate o Examples:  Cost of goods sole  Rent expense  Insurance expense  Depreciation expense • Retained Earnings: o All the net income from prior years less all the dividends paid out in prior years o The profit that is “retained” or kept within the business for future growth • Assets: o Owned by the company o Physical goods or legal right o Has future economic benefit for the company o Examples:  Cash  Accounts Receivable  Inventory  Supplies  Prepaid Expenses  Equipment • Liabilities: o Owed to outside parties o Due at a future date o Paid in cash, goods, or services o Examples:  Accounts payable  Interest payable  Mortgage payable  Bank indebtness • Owner’s Equity (Shareholders’ Equity): o Owed to shareholders o Made up of:  Common shares  Retained earnings o Paid out as dividends • Cash Flow: o Shows the cash receipts and cash payments for a period of time o Divided into 3 types of activities • Order of the financial statements: o 1. Income Statement o 2. Statement of Retained Earnings o 3. Balance Sheet o 4. Cash Flow Statement • Forms of organization: o Sole-proprietorship  1 owner, unlimited liability o Partnership  2 or more owners, unlimited liability o Corporation  Many owners, ownership based on shares, organized under province or federal government, limited liability • Types of Business Activities: o Financing – raising funds o Investing - buying land, building, equipment, etc. o Operating – selling goods/services • Internal/External Users of Accounting Information: o Examples of internal users:  Management o Examples of external users:  Bank/Creditors  Revenue Canada  Customers  Financial Analysts  Regulatory Agencies  Competitors  Suppliers  Current and Potential Owners • Financial statement assumptions: o Economic entity  Each entity has its own books, records, and financial statements that are separate from owners  No intermingling of personal and business assets and liabilities or income and expenses o Cost principle  Record assets at cost paid to acquire them  Continue to value assets at historical cost until sold  More objective than ma
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