ACCT 200 1st Edition Lecture 1 Outline of Current Lecture I. Types of AccountingII. Forms of Business OrganizationsIII. Business Activities to MeasureIV. Basic Accounting EquationV. ProfitabilityVI. Financial StatementsCurrent LectureManagerial acct – deals with the methods accountants use to provide information to an organization’s internal users; that is, its own managersFinancial acct – measures business activities of a company and communicates those measurements to externalparties for decision-making purposesAcct 200 is financial acct; acct 210 is managerial acctWho needs acct information? Investors, creditors, customers, suppliers, employees and managers, tax authorities and regulatorsForms of business organizations:Sole proprietorship – owned by a single person – works for small operations that don’t have a lot of riskPartnership – owned by two or more persons – e.g., dentists; still pretty easy but slightly more riskyCorporation – legally separate from its ownersWe will focus on corporationsBusiness activities to measure:1) Financing activities: involves funding from external sources2) Investing activities: involves purchase and sale of long-term resources (restaurant: oven, tables, cash register, refrigerator, etc) 3) Operating activities: involves transactions in primary operations of businessBASIC ACCOUNTING EQUATION: Assets=liabilities + stockholders’ equityAssets – resources owned by the business (cash, accounts receivable, land, equipment, supplies, inventory)Cash=money in a checking accountAccounts receivable=money due from customersSupplies=little things (paper, pencils…)Inventory=things you sell the customersLiabilities – debts owed to creditors (accounts payable, notes payable, wages payable and unearned revenue)Stockholders’ Equity – owners’ claim to net value of company (common stock, retained earnings)Profitability Revenue>expenses=net income; then company can distribute dividends to investorsRevenue<expenses=net lossRevenues=the amounts earned from selling products or services to customersExpenses=costs associated with running the business (paying wages, insurance, rent, etc)Supplies on a balance sheet/asset account=supplies sitting in a cabinet waiting to be usedSupplies expense=supplies used upRevenue when earned: provided a service for a customer, sold an item to a customer (they left with it), work is completed for a customer, provided a flight to the Bahamas for a customer (not buying a ticket but actually transporting me is when the airline has revenue)Expenses: hired a repair crew to repair plumbing issue that was fixedAt the end of each day a company has increased wage expenseCommunicating through financial statements: financial statements are periodic reports published by the company for the purpose of providing information to external usersIncome statement – financial statement that reports only the revenues and expenses over an interval of time; shows whether the company was able to generate enough revenue to cover the expenses of running the business, shows if there was a net profit or lossStatement of stockholders’ equity – financial statement that summarizes the changes in stockholders’ equity over an interval of time; consists of common stock + retained earningsRetained earnings=the cumulative profits of the businessBalance sheet – financial statement that presents the financial position of the company on a particular date; summarized by basic acct equation (assets=liabilities + stockholders’ equity) Statement of cash flows – financial statement that measures activities involving cash receipts and cash payments over an interval of time; can be classified into three categories (operating cash flows, investing cash flows, financing cash
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