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