Textbook Notes (290,000)
CA (170,000)
Western (10,000)
2257 (100)
Chapter

Business Administration 2257 Chapter Notes -Cash Flow Statement, Certified General Accountant, Retained Earnings


Department
Business Administration
Course Code
Business Administration 2257
Professor
Jason Dean

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CHAPTER 1 – FINANCIAL STATEMENTS AND BUSINESS DECISIONS
VINCOR INTERNATIONAL INC.
Things to know…
1. What categories of items/elements are reported on each of the four statements?
(What type of information does a statement convey, and where can you find it?)
2. How are the elements within a statement related? These relationships are usually
described by an equation that tells you how the elements forget together.
3. Why is each element important to managers’, owners’, or creditors’ decisions?
Four basic financial statements:
1. Balance sheet
2. Income statement
3. Statement of retained earnings
4. Cash flow statement
Can have yearly, quarterly, or monthly reports, though most companies do yearly and
quarterly.
Balance Sheet
Purpose: To report the financial position (amount of assets, liabilities, and
shareholders’ equity) of an accounting entity at a particular point in time.
Heading structure:
Name of the entity - Vincor International Inc.
Title of the statement - Balance Sheet
Specific date of the statement - At March 31, 2005
Unit of measure – (in thousands of dollars)
Heading looks like…
VINCOR INTERNATIONAL INC.
Balance Sheet
At March 31, 2005
(in thousands of dollars)
Balance sheet = financial snapshot, indicates entity’s financial position at a specific
point in time.
BASIC ACCOUNTING EQUATION/BALANCE SHEET EQUATION:
oAssets = Liabilities + Shareholder’s Equity
Financial position: the economic resources that a company owns and the sources of
financing for those resources.

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Elements:
oAssets
Cash
Accounts receivable
Inventories
Prepaid expenses
Intangible assets (i.e. patents, trademarks, franchises).
oLiabilities
Bank indebtedness
Accounts payable
Income taxes payable
Long-term debt
Future income taxes
oShareholders’ equity (amount of financing provided by business owners and
earnings).
Share capital (investment in the business by the owners).
Retained earnings (amount of earnings reinvested in the business).
Assets are listed by ease of conversion into cash.
Liabilities are listed by their maturity/due date.
Income Statement
Reports the accountant’s primary measure of performance of a business.
Reports information for a period of time, not a specific date, called an accounting
period.
Heading looks like…
VINCOR INTERNATIONAL INC.
Income Statement
For the Year Ended March 31, 2005
(in thousands of dollars)
Revenues – Expenses = Net Income
Elements
oRevenues
Sales revenues
oExpenses
Cost of goods sold
Selling expenses

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Administrative expenses
Interest expense
Income tax expense
oNet income (net earnings, profit, bottom line – can also be net loss).
Statement of Retained Earnings
Heading looks like…
VINCOR INTERNATIONAL INC.
Statement of Retained Earnings
For the Year Ended March 31, 2005
(in thousands of dollars)
Reports the way that net income and the distribution of dividends affected the
company’s financial position during the accounting period.
Beginning Retained Earnings + Net Income – Dividends = Ending Retained
Earnings
The Cash Flow Statement
Heading looks like…
VINCOR INTERNATIONAL INC.
Cash Flow Statement
For the Year Ended March 31, 2005
(in thousands of dollars)
Reports inflows and outflows of cash.
+/- Cash Flows from Operating Activities
+/- Cash Flows from Investing Activities
+/- Cash Flows from Financing Activities
Change in Cash
Elements
oCash flows from operating activities
Directly related to earning income.
Ex: Cash made when retailers pay for the wine.
oCash flows from investing activities
Related to the acquisition or sale of the company’s productive
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