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ACC - Chapter Notes.docx

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Department
Accounting
Course
ACC 110
Professor
Alison Beavis
Semester
Fall

Description
ACC110 – Chapter Notes Rahat Kabir Chapter 1 – The Accounting Environment: What is accounting and why is it done - Accounting: A system for gathering data about and entity’s economic activity, processing and organizing that data to produce information for people who want to make important decisions - Entity: Chapter 2 – Financial Statements: A window on an entity  Balance sheet – The financial statement that provides information about the financial position-its assets, liability and owners' equity-of an entity at a moment in time  Assets – Economic resources, for carrying out its business activities, that provide future benefits to an entity  Liabilities – An entity's ability to make payments as they come due  Owners’ equity – The investment the owners of an entity have made in the entity  Assets = Liabilities + Owners’ (Shareholders’) Equity  Assets (Leon’s): Cash (money), Accounts receivable (money owed by customers), Inventory (Goods available for sale to customers), Property, Plant, & Equipment  Current Assets – Assets that will be used up, sold, or converted to cash within one year or one operating cycle  Operating Cycle – The time it takes from the initial investment an entity makes in goods and services until cash is received from customers  Non-Current Assets – Assets that will not be used up, sold, or converted to cash within one year or one operating cycle  Current Liabilities – Liabilities that will be paid or satisfied within one year or one operating cycle  Non-Current Liabilities – Liabilities that will be paid or satisfied in more than one year or one operating cycle  Liabilities (Leon’s): Accounts payable and Accrued liabilities – Amounts owed to suppliers for goods and services purchased on credit (ex. Amounts owed to suppliers, employees, utilities etc.)  Customers’ Deposits – Customers pay in advance for goods to be provided in future  Income Taxes Payable – Amounts owed to government for income taxes  Deferred Warranty Plan Revenue – Amounts paid to Leon’s for extended warranty protection merchandise ACC110 – Chapter Notes Rahat Kabir  Dividends Payable – Dividends that have been declared by the board of directors but not yet paid to shareholders. (Dividends are payments, usually in crash, by a corporation to its shareholders)  Liquidity – An entity's ability to make payments as they come due (important to creditors)  Working Capital – Current assets minus current liabilities (the more current assets an entity has, the more current assets there are available to pay current liabilities)  Working Capital Ratio (Current Ratio) – A measure of entity's liquidity; defined as current assets divided by current liabilities  Common Shares – The amount of money (or other assets) that shareholders have contributed to the corporation in exchange for shares  Retained Earnings – These are reinvested net incomes: A balance sheet account that shows the amount of earnings a corporation has earned over its life, less dividends paid to shareholders
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