ACG 2021
FINANCIAL ACCOUNTING
CHAPTER 1
ACG 2021 is a Marathon
Pace yourself and don’t let up!
Question Which is the Home Team
Indiana Pacers
Miami Heat
Accounting Concepts & Principles
 Entity Assumption
 Going-Concern Assumption
 Historical Cost Principle
 Stable-Monetary-Unit Assumption
The Accounting Equation
 Assets = Liabilities + Stockholders Equity
 Assets = Liabilities + Paid in Capital + Retained Earnings
 Assets = Liabilities + Paid in Capital (+ Revenue – Expenses – Dividends)
 Assets + Expenses + Dividends = Liabilities + Paid in Capital + Revenue
The Financial Statements
Income Statement
 Also Known As:

Statement of Operations
 Measures:



Net Income
Net Earnings
Net Profit or Loss

Revenues – Expenses
 Time Period

During a specific period of time (arbitrary cutoff dates)



Monthly
Quarterly
Annually
Statement of Retained Earnings
 How did a company use it’s Earnings
 Paid out in Dividends


Reduces retained earnings since earnings are leaving the company
in the form of dividends to owners
Retained for Re-investment

Increases retained earnings
Balance Sheet
 Also Known As:

Statement of Financial Position
 Measures:

Assets


Liabilities


Resources of a business
Amounts business owes to others
Stockholders Equity
Paid in Capital
 Amount invested by shareholders
 Retained Earnings

 Time Period

A single point in time – A Snapshot of the Corporation
Cash Flow Statement
 Most Important Statement!
 What did the company do to:
 Generate Cash
 Spend Cash
 Examines 3 Aspects of Cash Creation/Use
 Operating
 Investing
 Financing
Accounts
Assets
Liabilities & Equity
 Cash
 Accounts Payable
 Other Payables
 Long-tern Payables
 Accounts Receivables
 Inventory
 Short term investments
 Prepaid Assets
 Supplies
 Land
 Property, Plant &
Equipment


Notes Payable
Bonds
 Common Stock
 Retained Earnings




Beg Retained Earnings
+ Revenue
- Expenses
- Dividends