BUSI 101 1st Edition Lecture 1Outline of Lecture II. Financial and Managerial AccountingA. DefinitionB. OverviewIII. Forms of Financial AccountingIV. Return Practice ProblemsV. Four Statements: Income Statement, Balance Sheet, Statement of Case Flows, Statementof Owner’s EquityCurrent LectureFather of Accounting – Luca Pacioli (Italian Monk)Investment Guru once said, “Accounting is the backbone of any business major in college”Financial Accounting – accounting done for external audiences- Conveyance of financial information to external parties so they can make good decisionsForms:- Proprietorship (majority) – one man show- Partnership – two or more individuals- “C” Corporation – two parts: contributingcapital and retained earnings- Limited Partnership – at least one general partner- “S” Corporation – limited to 100 shareholders- LLCManagerial Accounting – accounting done for internal purposesWhy buy shares or stock?1. Price appreciation2. Dividends (quarterly)Return = (end of the year price−beginning ofthe year price)+annual dividendbeginning of the year priceThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Ex. (114 −100)+2100=16% ReturnEx. (188−200)+4(1.50)200=-3% Return (depreciation)Ex. (328−300)+2300=10% ReturnEx. (424−400)+4(6)400=12% ReturnEx. An individual purchases shares for $80 on 10/1/1. A quarterly dividend was declared and paid by the corporation in November at 50 cents per share. On 12/31/1 the price of a share is $83. What is the annual return?((83− 80)+.5080)(4)=17.5 % ReturnThe following four statements must be included in the annual report:1. Income Statementa. Net Income = Revenues-Expenses2. Balance Sheeta. Assets=Liabilities + Owner’s Expenses3. Statement of Case Flows4. Statement of Owner’s EquityIncome Statement – represents a period in timeNI=R-ENominal or Temporary Accounts- Revenues – represents in flows (increases) in net assets from providing goods and/or services- Expenses – outflows or decreases in net assets from providing goods and/or serviceso Net Assets (Owner’s Equity) = Total Assets – Total LiabilitiesBalance Sheet - represents a point in timeReal or Permanent Accounts- Assets – economic resources- Liabilities – creditor’s claims, accounts payable- Owner’s Equity – owner’s claims- Contributed Capital- Retained Earnings – accumulated net income in excess of dividendsStatement of Cash Flows – represents a change in cash over a period of timeCategorize Change by: - Operating Activities – associated with income- Investing Activities – long-term assets- Financing Activities – long term liabilities and owner’s equityConnection between Income Statement, Balance Sheet, and Statement of Cash FlowsIncome Statement (12/31)Balance Sheet (1/1) Balance Sheet (12/31)Statement of Cash Flows (12/31)Statement of Owner’s Equity – the change from the beginning of the year to the end of the