Textbook Notes (363,452)
Canada (158,372)
Accounting (526)
ACC 110 (66)
Chapter 2

Chapter 2

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Ryerson University
ACC 110
Brad Mac Master

Accounting Chapter 2 Fiscal year: 12 month period which an entity provides information Assets - Economic resources, for carrying out its business activities, that provides future benefits to an entity - Controlled by the entity that will obtain the benefits (right to use the asset to make money) - Result of a transaction or event that has already occurred - Measurable Liability - Obligations an entity has to pay debt or provide goods or services - Result of past transaction or economic event - Require some kind of economic sacrifice to settle - Entity’s obligations to pay money or provide goods, or service to suppliers, lenders, customers, and government Owner’s Equity - The investment the owners of an entity have made in the entity. - Shareholder’s equity: owner’s equity of a corporation - Partner’s equity: owner’s equity of a partnership - Common shares: Reflects the amount of money that shareholders have contributed to the corporation in exchange for shares - Retained Earnings: Sum of all the net incomes a corporation has earned - Dividends: Payments, usually in cash by a corporation to its shareholder. Retained earnings is negative then referred as deficit Expense - Economic sacrifices can be the result of using up an asset or incurring a liability. Expenses result in a decrease in owner’s equity. Revenue/(Sales) - Economic benefits earned by providing goods or services to customers. Revenue results in an increase of owner’s equity Asset Liability Capital Revenu Expense Dividen e d + - - + - + - + + - + - Capital Asset Current Assets - Property - Converted into cash within one - Plant year - Equipment Non-Current Asset - Intangible asset - Extended beyond one year Current Liabilities Non-Current Liabilities - Paid within a year - Paid beyond a year *Asset = Liabilities + Owner’s Equity Operating Cycle: the time it takes from the initial investment made in goods and services until cash is received from customers Liquidity: Ability to convert assets to cash Working Capital =Current asset – Current liabilities Current Ratio = Current Asset ÷Current Liabilities - Current ass
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