Accounting Ch 1 & 14
Financial reporting
Reporting of financial information other than in formal financial statements and required footnote disclosures
Balance sheet (second primary)
Reports on the assets, liabilities, and stockholders' equity of the business as of a specific date.
Financing activities
a company to acquire money in order to support its operations
Financial accounting reports
a company's performance to external parties.
depreciation
a lessening in value of an asset that will affect the future benefit of a good
Blockchain technology
-A distributed ledger that provides a secure means to view recorded transactions.
Corporation
-A separate legal entity -The owner's of the corporation are the stockholders -The dominant organization type
underlying time period
-Managerial accounting focuses on projecting future operations. -Financial accounting focuses on reporting past operations.
Guiding standards
-Managerial accounting is not bound by external rules. -Financial accounting is bound by Generally Accepted Accounting Principles.
Primary objectives of managerial accounting
-Providing information for decision making, planning, and controlling. -Capturing, analyzing, and reporting internal data. •Financial and nonfinancial information. •Internal and external information. -Summarizing data in a form that is useful to internal users.
Investors
-need to know how profitable the company is compared to its competitors.
Finance department
-needs to know if there is enough cash to pay its short-term expenses.
human resources
-needs to know the effect of a four percent raise for all employees.
Accounting process
1.Identify the relevant economic activity 2.Quantify these activities 3.Record the results 4.Communicate/Report performance to users periodically.
Partnership
A voluntary association of two or more persons for the purpose of conducting a business
Government
Auditor, Tax, Budgeting, Criminal Investigation,
Public accounting
Auditor, Tax, Consulting
GAAP
Generally Accepted Accounting Principles
Adjust
Journalize adjusting entries and prepare adjusted trial balance
Close
Journalize closing entries and prepare post closing trial balance
Record
Journalize transactions and prepare unadjusted trial balance
Assests=
Liabilities + equity
Internal users managerial accounting
Management, Human Resources, Finance, department
Report
Prepare financial statements
Manufacturing
convert materials to a finished product through the use of machinery and/or labor.
Resources=
creditor claim + owner claims
Operating activities
day to day activities of production and selling a product or providing a service
Ethics
deals with the values, rules, and justifications that govern one's way of life.
expenses increases or decreases equity
decreases
Decreases in equity
decreases in resources from costs incurred and or used in running the business
Quantifying any information in the accounting process must be interpreted as
dollars
stockholders' equity consists of two parts
earned capitol contributed capital contributed by the stockholders
Balance sheet does not include
expenses revenues or dividends (income statement)
income statement (primary)
first thing
Types of financial statements
income statement, statement of retained earnings, balance sheet, statement of cash flows
Ways to increase revenue
increase the service or good is purchased or sold to customers
Revenue increases or decreases equity
increases
Managerial accounting plays a role in
internal decision making
External users financial accounting
investors creditors regulators
Managerial accounting
is the process of identifying, measuring, analyzing, interpreting, and communicating information for managers of a business organization for the purpose of achieving organization's goals.
Financial accounting
is the process of recording, summarizing and reporting the economic transactions of a business organization over a specified time period
When do we adjust and report
monthly quarterly semiannually or annually
Regulators (SEC)
need to know if rate increases are justified
Creditors (Banks)
need to know if the company has the ability to repay its loans.
Management
needs to know the profitability of each division
Service
neither make nor sell a tangible product
Three categories a statement of cash flows
operating, investing, financing
Why would equity increase
owner contributions in the form of capital and revenue increases
Retained earnings
past net incomes
Careers in accounting
private public and government accounting
investing activities
purchasing resources, acquire or dispose of Land Labor and Capital
Statement of Cash Flows
reports a company;s cash flow during a given year
statement of stockholders' equity
reports the events causing an increase or decrease in a business's stockholders' equity during a given time period, including both the changes in a company's common stock and changes in its retained earnings
Net income
results when revenue exceeds expenses
Net income
results when revenues exceed expenses
Net income from the income statement is used to compute ending retained earnings on the statement of
retained earnings
Net income goes where at the end of the year
retained earnings
What are accounting elements used on income statements
revenues (on top) expenses (on bottom)
Statement of stockholders' equity (reconcile)
second thing
Ending common stock, retained earnings, and total equity from the
statement of stockholders' equity is shown on the balance sheet
Accounting equation
states that the sum of a business' economic resources must equal the sum of any claims in those resources
A balance sheet is not balanced when a ________________ is not prepare
stockholders' equity statement
Where is The ending cash balance on the statement of cash flows shown
the balance sheet
The beginning-of-period balance sheet shows
the company's financial position at the earlier point in time.
The end-of-period balance sheet reports
the company's financial position at this later point in time.
equity (stockholders' equity)
the owners' claims to the assets of the business
Data analytics
the process of examining sets of data to discover useful information from patterns in the data
Balance sheet is
what we own/owe in a particular point in time
Merchandising
•purchase finished products from a manufacturer and then sell the product to a customer.
Private accounting
Analyst, internal Audit, Tax, Budgeting, Cost Accounting
Accounting cycle
Analyze, Record, Adjust, Report, Close
Sole Proprietorship
A business owned by one person and the most common
Misleading financial statements lead to
Certified Public Accountants lose a job and people losing retirement
How often do you analyze and record
Daily (financial statements)
The income statement, statement of stockholders' equity, and statement of cash flows report
activity for a period of time
Asset
an economic resource that a business owns and can use to operate the business beneficially in the future
Analyze
analyze transactions from source documents
liabilities
are debts that are owed to creditors (many liabilities have the word payable in their titles)
Expenses
are decreases in resources from providing revenue
When do we close the accounting cycle
at the end of the year only