Chapter One
the financial statements
vocabulary words
vocabulary words
• Words for which you need to know the
definition (word for word or almost word for
word)
• Words which you need to understand or be
able to describe
Definition
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Accounting
Revenue
Expense
Assets
Liabilities
• Current assets
• Current liabilities
understand and be able to describe
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Financial accounting
Managerial accounting
GAAP
FASB
IFRS
IASB
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Sole proprietorship
Partnership
Corporation
Limited liability company
understand and be able to describe
When discussing how a business is
organized there are two questions.
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Sole proprietorship
Partnership
Corporation
Limited liability company
Does the business entity pay income tax
or does the obligation to pay tax on the
entity’s income flow through to the
owner(s)?
Can the owners’ of the business be held
liable for the entity’s liabilities
or, are the owners shielded from the
entity’s liabilities?
When the owners are shielded from the
entity’s liabilities, we say the owners enjoy
limited liability.
Financial Statements
Miller Motor Co.
Income Statement
for the year ending Dec. 31, 2013
Revenue
- Expenses
+gains
-losses
Net Income
Miller Motor Co.
Statement of Retained Earnings
for the year ending Dec. 31, 2013
Retained earning as of Jan. 1, 2013
+ Net income
- Dividends (paid to owners)
Retained earnings as of Dec. 31, 2013
Miller Motor Co.
Balance Sheet
as of Dec. 31, 2013
Cash
Short-term investments
Accounts receivable
Inventory
Prepaid expenses
Current assets
Accounts payable
Income tax payable
Wages payable
Current liabilities
Notes payable
Non current liabilities
Land
Buildings
Equipment
Property, plant & equipment
Common stock
Retained earnings
Stockholders’ equity
Assets
Liabilities and stockholders’ equity