Acounting 200Accounting: The study of how business, non-business, and individuals interact in our economy.- Measures the effect of transactions between entities- Provides us with a measurement against which to compare resultsCommon Terms:- Financial info- investors- creditor- interestTypes of Entities- sides proprietorship- partnership- corporationo legal entityo continuous lifeo transferable ownershipWhy do corporations need cash?- To purchase things in order to do what they need to do- For productive assets for the companyRevenue and expenses- Net incomeBorrowing money to invest to make more moneyHow do they get cash?- Selling services and products - Borrowing from lenders- Selling stock to investersFinancial Accounting - Providing economic info to order to enhance decision making- Investors- Creditors- Others outside of the entityWhen you buy stock, you become an ownerMarket Capitalization: number shares owned x share priceGoing private: the reverse of selling stock to public-one entity buys lots of stockManagerial Accounting: - Provides economicInformation to investors:- SEC: Security and Exchange Commissiono Enforce/make rules for stock exchange4 Basic Financial Statements:- Balance sheets- Income statement- Statement of changes in retained earnings- Statement of cash flowsBalance Sheets:- Assets- Liabilities- Owners equity- Assets-liabilities= owners equity (Accounting equation)- Equity measures growth- Retained earningFundamental Accounting Model- Assets=liabilities + owners equityPaid in Capital (common stock)Owners Equity:- Retained Earnings- Paid in capitalIncome statementsRevenueComplCompleting a cash flow statement:1. Read problem and especially take note of the “other info” section.2. Record transaction for any of the additional information (i.e. equipment)3. Post revenues and expenses to the appropriate t-accounts4. Find the other side of each revenue and expense and label each one5. Close all revenues and expenses to income summary6. Close income summary to retained earnings7. Reconcile all balance sheet accountsHow to figure the cash credit amount:- Take the max petty cash level and subtract the total of the cash left over.- This should equal the petty cash ticket total. If not, there will be a cash short and over account- A debit to cash short and over is like a miscellaneous expense- A credit to cash short and over is like miscellaneous