Chapter 1 9th ed.
Financial Statements
7 17 20 15
8 14 59
Financial Accounting
Accounting is an information system that measures business activities, processes data into reports and
communicates the results to decision makers
BUS 214 – Financial Accounting
BUS 215 – Managerial Accounting
In financial accounting the reports we use to communicate with interested parties are called financial
statements.
GAAP – generally accepted accounting principles – the rules, the standards, the principles used to
prepare the financial statements.
FASB - Financial Accounting Standards Board
IFRS - international financial reporting standards
IASB - International Accounting Standards Board
Businesses are typically organized as
The issues are
liability and taxes
Fin State don’t equal IRS
Net Income not equal Taxable Income
***
Sole proprietorships
Exh 1-2
Partnerships
Corporations
Limited liability companies
Building Blocks of financial reporting
Revenue
_____ expenses
Assets
Liabilities
Owners’ Equity
p. 12
Income Statement
Statement of Retained Earnings
Balance Sheet
( Statement of Cash Flows )
p. 11
definitions are also at the end of the chapter (pages 30-31)
Page 23
Income Statement
Statement of Retained Earnings
Balance Sheet
For the year ended Dec. 31, 2012
For the year ended Dec. 31, 2012
As of Dec. 31, 2012
Revenues
Expenses
Net Income
Retained Earnings at Jan. 1 2012
plus Net Income
less Dividends (paid)
Retained Earnings at Dec. 31, 2012
Accounting Equation A= L + OE
S1-7 E1-17 E1-20 E1-15
Assets
Liabiliies
Owners’ Equity
Assets
= Liab +Own Eq
Income Statement
Sales (a type of revenue)
Expenses
(Net Income)
Statement of Retained Earnings
Balance Sheet
page 1
Net Income
Dividends (paid)
Cash
Short-term investments
Accounts Receivable
Notes Receivable
Merchandise Inventory
Prepaid (expenses)
Assets define p. 30
Current Assets define p. 30
(long-term) Investments
Property, Plant & Equipment
Intangible Assets
Other Assets
Statement of
Cash Flows
Accounts Payable
Income Tax Payable
Wages Payable
Notes Payable
Short-term Borrowings
Current Liabilities – define p. 30
Common Stock
Retained Earnings
Owners’ Equity
Operating Activities
Investing Activities
Financing Activities
S1-8 S1-14
P1-59
Characteristics that will make Financial Statements useful (vocabulary words)
Prinicples that guide the formulation of generally accepted accounting principles
Relevant
Faithful representation
Comparable
Entity
Cost
Going Concern
p. 6-9