Presentations for Chapter 2 by Glenn Owen

 The three basic activities of a business and how they are reflected in the financial statements.
 The balance sheet, income statement, statement of retained earnings, and statement of cash flows and how these financial statements are used.

Operating
Activities
Fruit
Investing
Activities
Trunk/
Branches
Financing
Activities
Roots

 Assets
 Liabilities
 Stockholders’ equity

 Current assets
– Cash
– Short-term investments
– Accounts receivable
– Inventory
– Prepaid expenses
 Long-term investments
 Property, plant, and equipment
 Intangible assets

 Current liabilities
– Accounts payable
– Wages payable
– Interest payable
– Short-term notes payable
– Current maturities of long-term debt
– Deferred revenues
– Other payables
 Long-term liabilities

 Contributed capital
 Retained earnings

 Operating revenues
–
–
–
Sales
Fees earned
Other revenues

–
–
–
–
Operating expenses
–
–
–
Cost of goods sold
Wage expense
Rent expense
Selling expense
Depreciation expense
Amortization expense
Other expenses

 Beginning retained earnings balance
 Plus: Net income
 Less: Dividends
 = Ending retained earnings balance




Cash flows from operating activities:
– Collections from sales, rent, interest, etc.
– Cash paid to suppliers and employees, and for rent, selling activities, interest, and taxes etc.
Cash flow from investing activities:
– Proceeds from sale of investment securities, property, etc.
– Purchase of investment securities, property, etc.
Cash flow from financing activities:
– Proceeds from issuance of notes, debt, sale of equity, etc.
– Payments on notes, debt, dividends, etc.

Cash from the
Beginning Balance
Sheet is included in the Statement of Cash
Flows
.
Statement of
Cash Flows
Ending cash from the
Statement of Cash Flows is included in the Ending
Balance Sheet.
Beginning
Balance Sheet
Retained earnings from the Beginning
Balance Sheet is included in the Statement of Retained Earnings
Income
Statement
Net income from the Income
Statement is included in the
Statement of Retained
Earnings
Statement of
Retained
Earnings
Ending
Balance Sheet
Ending retained earnings from the Statement of Retained
Earnings is included in the
Ending Balance Sheet .

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