Chapter 1

Obj. 5 Using the income statement for Ousel Travel Service shown in Exercise 4, prepare a retained earnings statement for the year ended November 30, 2018. Shane Ousel invested an additional $50,000 in the business in exchange for common stock during the year and cash dividends of $30,000 were paid. Retained earnings as of December 1, 2017, was $566,000.

RE Dec 2017 x Net Income x Dividends x Change in RE. x RE Nov 2018 x

Transaction Statement Key Points

The effect of every transaction is an increase or a decrease in one or more of the accounting equation elements. The two sides of the accounting equation are always equal. The stockholders' equity is increased by amounts invested by stockholders (common stock). The stockholders' equity is increased by revenues and decreased by expenses. The stockholders' equity is decreased by dividends paid to stockholders.

Liabilities

amounts owed by the firm

Assets

anything the business owns of value Example ( Land, cash, equipments)

Manufacturing businesses

change basic inputs into products that are sold to customers. example: Dell- makes personal computers Ford Motor inc- makes ford cars to sell to dealers

managerial accounting

deals with internal users such as managers and employees. These users are directly involved in managing and operating the business. The objective of managerial accounting is to provide relevant and timely information for managers' and employees' decision-making needs. Often, such information is sensitive and is not distributed outside the business. Examples of sensitive information might include information about customers, prices, and plans to expand the business.

Service businesses

provide services rather than products to customers. Example: Delta airlines- provides transportation Barber shop- provides haircuts

Merchandising businesses

sell products they purchase from other businesses to customers. Example: Walmart- has many brands stuff in one store Footlocker- Has many brands of shoes in one store

Role of accounting

to provide information for managers to use in operating the business.

Equity

A form of ownership in a firm

balance sheet

A list of the assets, liabilities, and stockholders' equity as of a specific date, usually at the close of the last day of a month or a year.

statement of cash flow

A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year. The statement of cash flows consists of the following three sections, as shown in 1.operating activities 2.investing activities 3.financing activities

retained earnings statement

A summary of the changes in the retained earnings that have occurred during a specific period of time, such as a month or a year. net income - net loss = retained earnings

income statement

A summary of the revenue and expenses for a specific period of time, such as a month or a year revenue-expenses= net profit/loss

Financial Statement

After transactions have been recorded and summarized, reports are prepared for users. Composed of 4 statements in this order 1. income statement 2. retained earnings statement 3. balance sheet 4. statement of cash flow

business transaction

An economic event or condition that directly changes an entity's financial condition or directly affects its results of operations

Obj. 5 Using the following data for Ousel Travel Service as well as the retained earnings statement shown in Exercise 5, prepare a balance sheet as of November 30, 2018: Accounts payable $ 62,500 Accounts receivable 186,000 Cash 308,000 Common stock 150,000 Land 480,000 Supplies 16,500

Assets Cash x Accounts Receivable x Supplies x Land x Total Assest. x Liabilities Accounts Payable x SOE Common Stock x Retained Earning Nov 2018. x Total SOE x Total Liabilities and SOE x

Accounting Equation

Assets= liabilities + Equity

Obj. 5 A summary of cash flows for Ousel Travel Service for the year ended November 30, 2018, follows: Cash receipts: Cash received from customers $1,465,000 Cash received from issuing common stock 50,000 Cash payments: Cash paid for operating expenses 1,230,000 Cash paid for land 150,000 Cash paid as dividends 30,000 The cash balance as of December 1, 2017, was $203,000. Prepare a statement of cash flows for Ousel Travel Service for the year ended November 30, 2018.

Cash flow from Operation Cash received from customer x Cash payments from operation expense. x Net cash flow from operation x Cash Flow from investing Cash Payment for land x Cash flow from financing activities Cash from Common stock x Cash Dividends x Net cash flow from financing activities x Net increase in Cash x Cash December 2017 x Cash November 2018 x

Financial Accounting

External users of accounting information include investors, creditors, customers, and the government. These users are not directly involved in managing and operating the business. The objective of financial accounting is to provide relevant and timely information for the decision-making needs of users outside of the business. For example, financial reports on the operations and condition of the business are useful for banks and other creditors in deciding whether to lend money to the business.

Obj. 5 The revenues and expenses of Ousel Travel Service for the year ended November 30, 2018, follow: Fees earned $1,475,000 Office expense 320,000 Miscellaneous expense 28,000 Wages expense 885,000 Prepare an income statement for the year ended November 30, 2018.

Fees Earned x Expenses: Wages. x Office. x Misc x Total Expens x Net Income. x