BUS 251 Chapter Notes - Chapter 2: Cash Flow Statement, Deferral, Retained Earnings

57 views4 pages

Document Summary

Chapter 2: analyzing transactions and their effects on fs. How does sets of transactions affect company"s accounts. Basic accounting equation: assets = liabilities + shareholder"s equity. In the beginning the amounts are balanced showed on the outside column. Transactions are recorded in the accounting system (two sides must balance) Comparative statement: have more than 2 periods in the same fs. To find out what transaction happened in the company that changed the fs ending balance we can take a look at the cash flow statement and earnings. Accounting period: the period of time that the fs cover. Revenues increase retained earnings, dividends decrease retained earnings. Transaction analysis: analyze economic substance to decide what accounts are affected and by how much. Transaction 1: issuance of shares for cash from investors: analysis the shareholder"s trade the company (asset) for share ownership rights (share capital)