Accounting= the Language of business
Financial account
- two functions of financial accounting are (on quiz)
1) to measure business activities of a company
2) to communicate those measurements to external parties for decision making purposes
Who uses this type of accounting= investors, creditors, taxing authorities
framework for financial accounting
- actitvbites are measure by accountants and it is communicated to investors and creditors
and they make a Denison about a company and then all over again
3 types of business activities that we measure
1) financing= when the company borrows money and if they repay it or if they are obtaining
money from shareholders and paying them back. Transactions between the company
and its owners or creditors
2) investing= transactions involving the purchase and sale of resources that are expected
to benefit the company for serveal years. When a company goes out and they buy or sell
long lived assets or investments. Like when a company goes out and buys a computer or
furniture it is considered in vestments because these assets live longer than supply or
rent your paying
3) operating= activites that are co ducted over a normal course of business. Transactions
that relate to the primary operations of the company (paying a lease, salary, etc)
types of business organizations
- a corporation is a company that is legally separate from its owners. The advantage of
being Leah ally separate is you have limited liability. Ex= investing in apple stock and
you buy shares and the stock goes down and appple goes bankrupt you are a
shareholder and the amount you can lose is only how much you lose from the shares
you put i. Creditors can not come after you for me like ur house or car.
- a sole proprietorship is a business owned by one persons. Unlimited liability so kinda
risky
- a partnership is a business owned by two or more persons. Unlimited liability
- neither sole proprietorship nor parternships offer limited liability
- try and avoid partnership air proprietorship
assets, liabilities,and stockholders equity
- the accounting equation is assets= liability (creditors claim) + stockholders equity
(owners claims)
- assets= totoal resource of the company (smth that the company owned) ex= land or
equipment, cash, inventory, accounts receivable (money owed by customers),
investment, gold, supplies). Computers ina office can be an asset. If u r running a law
firms u need computers because that is the only way you can make money. Can also be
, considered as something ghtta will benefit the company int he future. When solving an
equation you include cash, accounts receivable, supplies, prepaid rent, equipment
- Assets can include (on balance sheet) cash, equipment, land,
- Liabilities- amounts owed to creditors. When borrowing money from banks or creditors.
If you don’t pay them they have a claim to some of your assets.
- Liabilities can include accounts payable (owe vendors) , notes payable, deffered revenue
(agreement between you and a bank), wages available/ salary.
- When solving an equation you include accounts payable and notes payable
- stockholders equity= owners claims to resources. Anytime a company is started
investors willl invest. Initial funds and finciane the company receives. If they want to
close the company the second day they are allowed to get back.
- the accounting equation illustrates a fundamental model of business valuation
- Stockholders equity can include Common stock and retained earnings (internal source of
funding),
- when solving equation you include common stock and retained earning (retained
earnings include revenues, expenses, and dividends
Revenues expenses and dividends
- revenues-= the amount of money you earn by selling a prioduct or doing a service. The
amounts recognized when the company sells products or provides services to
customers. If you do a service and they didn’t pay you yet that is still considered revenu.
You earned the amount of money you worked for.
- Expenses= the costs of providing products and services and other business activities.
Ex= rent, utilities, interest, salaries,
- net income= ur price or ur lost. (Revenue- expenses= net income). If
expenses re higher than ur expenses then you lose money. Net loss.
- dividends= cash payments to stockholders. You simply returning money to
shareholders. Not a cost of doing business its you dividending money at the end of the
year to shareholders. They are not expenses
4 primary financial statements
- peridiodic reports published by the company for the purpose of ___
1) income statemnts= reports the company’s revenues and expenses over an interval of
time.
- Includes revenues and expenses
- if revenues are greater than expensively then you have net income
- if revenes are less than expenses you have net lost
- of does not say revenue or expense you can rule it out as an income statement
2) statment of stockholders equity= a common stock+ retained earnings.
- common stock= external source of equity, amounts invested bu stokcholofer when they
purchase their shares
- retained earrings= internal source
- common stock- counts as how much shareholders invested in the corporation
3) balance sheet = assets, liabilities, and stockholders equity
Financial account
- two functions of financial accounting are (on quiz)
1) to measure business activities of a company
2) to communicate those measurements to external parties for decision making purposes
Who uses this type of accounting= investors, creditors, taxing authorities
framework for financial accounting
- actitvbites are measure by accountants and it is communicated to investors and creditors
and they make a Denison about a company and then all over again
3 types of business activities that we measure
1) financing= when the company borrows money and if they repay it or if they are obtaining
money from shareholders and paying them back. Transactions between the company
and its owners or creditors
2) investing= transactions involving the purchase and sale of resources that are expected
to benefit the company for serveal years. When a company goes out and they buy or sell
long lived assets or investments. Like when a company goes out and buys a computer or
furniture it is considered in vestments because these assets live longer than supply or
rent your paying
3) operating= activites that are co ducted over a normal course of business. Transactions
that relate to the primary operations of the company (paying a lease, salary, etc)
types of business organizations
- a corporation is a company that is legally separate from its owners. The advantage of
being Leah ally separate is you have limited liability. Ex= investing in apple stock and
you buy shares and the stock goes down and appple goes bankrupt you are a
shareholder and the amount you can lose is only how much you lose from the shares
you put i. Creditors can not come after you for me like ur house or car.
- a sole proprietorship is a business owned by one persons. Unlimited liability so kinda
risky
- a partnership is a business owned by two or more persons. Unlimited liability
- neither sole proprietorship nor parternships offer limited liability
- try and avoid partnership air proprietorship
assets, liabilities,and stockholders equity
- the accounting equation is assets= liability (creditors claim) + stockholders equity
(owners claims)
- assets= totoal resource of the company (smth that the company owned) ex= land or
equipment, cash, inventory, accounts receivable (money owed by customers),
investment, gold, supplies). Computers ina office can be an asset. If u r running a law
firms u need computers because that is the only way you can make money. Can also be
, considered as something ghtta will benefit the company int he future. When solving an
equation you include cash, accounts receivable, supplies, prepaid rent, equipment
- Assets can include (on balance sheet) cash, equipment, land,
- Liabilities- amounts owed to creditors. When borrowing money from banks or creditors.
If you don’t pay them they have a claim to some of your assets.
- Liabilities can include accounts payable (owe vendors) , notes payable, deffered revenue
(agreement between you and a bank), wages available/ salary.
- When solving an equation you include accounts payable and notes payable
- stockholders equity= owners claims to resources. Anytime a company is started
investors willl invest. Initial funds and finciane the company receives. If they want to
close the company the second day they are allowed to get back.
- the accounting equation illustrates a fundamental model of business valuation
- Stockholders equity can include Common stock and retained earnings (internal source of
funding),
- when solving equation you include common stock and retained earning (retained
earnings include revenues, expenses, and dividends
Revenues expenses and dividends
- revenues-= the amount of money you earn by selling a prioduct or doing a service. The
amounts recognized when the company sells products or provides services to
customers. If you do a service and they didn’t pay you yet that is still considered revenu.
You earned the amount of money you worked for.
- Expenses= the costs of providing products and services and other business activities.
Ex= rent, utilities, interest, salaries,
- net income= ur price or ur lost. (Revenue- expenses= net income). If
expenses re higher than ur expenses then you lose money. Net loss.
- dividends= cash payments to stockholders. You simply returning money to
shareholders. Not a cost of doing business its you dividending money at the end of the
year to shareholders. They are not expenses
4 primary financial statements
- peridiodic reports published by the company for the purpose of ___
1) income statemnts= reports the company’s revenues and expenses over an interval of
time.
- Includes revenues and expenses
- if revenues are greater than expensively then you have net income
- if revenes are less than expenses you have net lost
- of does not say revenue or expense you can rule it out as an income statement
2) statment of stockholders equity= a common stock+ retained earnings.
- common stock= external source of equity, amounts invested bu stokcholofer when they
purchase their shares
- retained earrings= internal source
- common stock- counts as how much shareholders invested in the corporation
3) balance sheet = assets, liabilities, and stockholders equity
