Financial Accoun ng Robert Libby 11e Chapter 1
Internal Decision Makers - Run the company. Manage the opera ng, inves ng, and financing ac vi es of
the firm. Managers are an example.
External Decision Makers - Evaluate the company. Need informa on about business ac vi es to assess
whether the company will be able to pay back its debts with interest and pay dividends. Stockholders
and creditors are examples.
Accoun ng - System that collects and processes finanical informa on about an organiza on and reports
that informa on to decision makers.
Two Parts of Accoun ng System - External financial reports and internal management reports.
External Financial Reports - Periodic financial statements and related disclosures provided to external
decision makers who evaluate the company.
Internal Management Reports - Detailed plans and con nuous performance reports provided to internal
decision makers who run the company.
Four Types of Financial Statements - Balance sheet, income statement, statement of stockholders'
equity, and statement of cash flows.
Balance Sheet Overview - Reports the economic resources a company owns and the sources of financing
for those resources.
Income Statement Overview - Reports the company's ability to sell goods for more than their cost to
produce and sell.
Statement of Stockholders' Equity Overview - Reports addi onal contribu ons from, or payments to
investors, and the amount of income the company reinvested for future growth.
, Statement of Cash flows Overview - The company's ability to generate cash and how it was used.
Balance Sheet Header - 1. Name of the en ty
2. Title of the statement
3. Specific Date of the Statement
4. Unit of measure
Basic Accoun ng Equa on - Assets (Economic resources that the company owns) = Liabili es (Financing
from creditors which the company owes to creditors) + Stockholders' equity (Financing from
stockholders which the company owes to owners)
Balance Sheet Element - Assets - 1. Cash
2. Accounts receivable (Amounts owed by customers from prior sales)
3. Inventories
4. Property, plant and equipment
5. Total assets
Balance Sheet Elements - Liabili es and Stockholders's Equity - Liabili es
1. Accounts payable (Amounts owed to suppliers for prior purchases)
2. Notes payable to banks (Amounts owed to banks in wri en debt contracts)
3. Total liabili es
Stockholder's equity
1. Common stock (Amounts invested in the business by stockholders)
2. Retained earnings (Past earnings not distributed to stockholders)
3. Total stockholders' equity
1. Total liabili es and stockholders' equity
Income Sheet Header - 1. Name of en ty
Internal Decision Makers - Run the company. Manage the opera ng, inves ng, and financing ac vi es of
the firm. Managers are an example.
External Decision Makers - Evaluate the company. Need informa on about business ac vi es to assess
whether the company will be able to pay back its debts with interest and pay dividends. Stockholders
and creditors are examples.
Accoun ng - System that collects and processes finanical informa on about an organiza on and reports
that informa on to decision makers.
Two Parts of Accoun ng System - External financial reports and internal management reports.
External Financial Reports - Periodic financial statements and related disclosures provided to external
decision makers who evaluate the company.
Internal Management Reports - Detailed plans and con nuous performance reports provided to internal
decision makers who run the company.
Four Types of Financial Statements - Balance sheet, income statement, statement of stockholders'
equity, and statement of cash flows.
Balance Sheet Overview - Reports the economic resources a company owns and the sources of financing
for those resources.
Income Statement Overview - Reports the company's ability to sell goods for more than their cost to
produce and sell.
Statement of Stockholders' Equity Overview - Reports addi onal contribu ons from, or payments to
investors, and the amount of income the company reinvested for future growth.
, Statement of Cash flows Overview - The company's ability to generate cash and how it was used.
Balance Sheet Header - 1. Name of the en ty
2. Title of the statement
3. Specific Date of the Statement
4. Unit of measure
Basic Accoun ng Equa on - Assets (Economic resources that the company owns) = Liabili es (Financing
from creditors which the company owes to creditors) + Stockholders' equity (Financing from
stockholders which the company owes to owners)
Balance Sheet Element - Assets - 1. Cash
2. Accounts receivable (Amounts owed by customers from prior sales)
3. Inventories
4. Property, plant and equipment
5. Total assets
Balance Sheet Elements - Liabili es and Stockholders's Equity - Liabili es
1. Accounts payable (Amounts owed to suppliers for prior purchases)
2. Notes payable to banks (Amounts owed to banks in wri en debt contracts)
3. Total liabili es
Stockholder's equity
1. Common stock (Amounts invested in the business by stockholders)
2. Retained earnings (Past earnings not distributed to stockholders)
3. Total stockholders' equity
1. Total liabili es and stockholders' equity
Income Sheet Header - 1. Name of en ty
