Textbook Notes (368,875)
Canada (162,227)
MGAB01H3 (126)
Daga (4)
Chapter 4

MGTB05 chapter 4

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Financial Accounting

Trial balance trial balance a list of all accounts with their balances, to provide a check on the equality of the debits and credits. list of individual accounts in one column, with ending debit or credit balances in next two columns. not intended for external users. contra account. an account directly related to another account, has a balance on the opposite side of the T-account. as contra account increases. the net amount decreases. property, plant, and equipment has a contra account called accumulated depreciation. identify transaction as deferrals or accruals by whether cash is received or paid in the past or future. Materiality and adjusting entries. materiality - suggests that minor items would not influence the decisions of financial statement users are to be treated in the easiest and most convenient manner. concept describes relative significance of financial statement information in influencing economic decisions made by financial users. whether omission or misstatement would be influence or change a decision auditors use professional judgement to decide whether both individuals transaction are aggregated small transaction will result in material misstatement of financial position of the company. traditional rule of thumb, item is considered material if it exceeds 1- 1.5 percent of total assets or sales., 5-110 percent of profit. Income statement Income statement prepared first because profit is a component of retained earnings. Earnings per share (EPS) is reported on the income statement. widely used in evaluating operating performance and profitability. the only ratio disclosed on financial statements and notes, earnings per share= (Profit available to common shareholders)/ (weighted-average Number of common shares outstanding during the period) denominator average number of shares outstanding( number at the beginning of the period plus number at end of period divided by 2) Statement of changes in equity Profit carried over from income statement to the retained earnings column of statement of changes in equity. dividends declared is deducted. issuance of shares is added to share capital. statement of financial position ending balances of share capital, retained earnings, and other components from changes in equity statement are included in the statement of financial positi
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