Accounting 225 Chapter 1
Revenues
Amounts recorded when the company sells a product or service
What are the two primary components of stockholders equity
1. Common Stock 2. Retained Earnings
What are the Four Primary Financial Statements
1. Income Statement 2. Statement of Stockholders Equity 3. Balance Sheet 4. Statement of Cash Flow
Two functions of financial accounting
1. To measure business activities of a company 2. Then communicate this measurements to external parties for decision making purposes
Corporation
A company that is legally separate from its owners. This gives stockholders limited liability
Income Statement
A financial statement that reports the company's revenues and expenses over an interval of time
Statement of Stockholders Equity
A financial statement that summarizes the changes in stockholders' equity over an interval of time.
Managerial Accounting
Accounting information that is provided to internal users (managers)
Dividends
Cash payments to stockholders
Heading
Includes the company's name, the title of the financial statement, and the time period covered by the financial statement
Investing Activities
Includes transactions involving the purchase and sale of resources that are expected to benefit the company for several years
Operating Activities
Includes transactions that that relate to the primary operations of the company like rent, salaries, utilities, taxes etc.
Financing Activities
Includes transactions the company has with investors and creditors
Retained Earnings
It is an internal source of the stockholders equity. It represents the cumulative amount of net income, earned over the life of the company, that has been kept (retained) in the business rather than distributed to stockholders as dividends (not retained).
Financial Statements
Periodic reports published by the company for the purpose of providing information to external users
Financial Accounting
Provided to external users
Common Stock
Represents the amounts invested by stockholders when they purchase shares of the stock. It is an external source of the stockholder's equity
Limited Liability
prevents stockholders from being held personally responsible for the financial obligations of the corporation