Accounting

Accounting

1. Objective

   • Provide Information that is
     • Useful to investors and creditors in making decisions
     • Helpful to Predict Cash Flow
     • Tells about economic resources, claims to resources and changes in resources and claims

2. "the language of business"

   • Primary Functions
     • Communicate those measurements to investors and other people for making decisions
       • Four Primary Financial Statements
         • Income Statement
           • Reports the company's Revenue and Expenses over an interval of time
             • Purpose: To find out whether the company is profitable
               • Net Income = Revenue > Expenses
               • Net Loss = Expenses > Revenue
         • Statement of Stockholders' Equity
           • Summarizes the changes in stockholder's equity over an interval of time
             • Sell Common Stock = Increase in Equity Excess Dividends = Increase in Equity
           • Shareholder's Equity = Common Stock + Retained Earnings
             • Common Stock: Amount invested by Stockholders when they purchase the shares of stock (external source of SE)
               • Retained Earnings: NI - ALL DIVIDENDS (internal source of SE)
         • Balance Sheet
           • Presents the financial position of the company ON A PARTICULAR DATE
             • Asset = Liabilities + Shareholders' Equity
             • Owner/Creditor Claim
               • Amount of Total Liabilities = Creditors' Claims of the Company's Resources
                 • Total Assets > Total Liabilities = Owner's Claim
         • Statement of Cash Flows
           • Measures activities involving cash receipts and cash payments over an interval period of time
             • Net change in cash = Operating Cash Flows + Investing Cash Flows + Financing Cash Flows
               • Operating Cash Flows
                 • Cash receipts and cash payments for transactions involving R & E during the period
                   • Provide info to the Investors about the Forecast Company's Future Profitability = R/S between NI & OCF
                     • Paying for Research & Development Costs
                     • Pay Taxes to the IRS
                     • Provide services to the customers
                     • Purchase officce supplies
               • Investing Cash Flows
                 • Cash transactions for the purchase of investment and long-term assets (> a year)
                   • Provide info to the Creditors about the company's ability to pay debt: Comparing OCF and ICF
                     • Purchase Equipments for Operation
                     • Notes Receivable
                     • Accounts Receivable
                     • Purchase Common Stock
               • Financing Cash Flows
                 • Cash transactions with lenders: Borrowing & Repaying Debt Stockholders: Issuing stock and paying dividends
                   • Provide info to Investors & Creditors about the mix of external financing of the company
                     • Sell/Issue Common Stock to investors
                     • Pay amount owed to the bank for previous borrowing
     • Measure activities of a company
       • Resources of the company, Amounts Owed & Stockholder's Investment
         • Assets: Resources of a Company
           • Liabilities: Amount owed by the Company (Creditors' Claim)
             • Stockholder's Equity: Owners' Claim to the entity's assets
               • Assets = Liabilities + Shareholders' Equity
               • Common Stock/Share Capital: Owners' investment in the corporation
               • Retained Earning: Cumulative net income
                 • Net Income (Revenue- Expense) - All Dividends
               • Dividends: Optional and it is in indicated as (-) in Retained Earning
               • Shareholders' Equity = Common Stock + Retained Earnings
             • Accounts Payable: Direct oppo of A/R
             • Notes Payable: The party that borrows from others
             • Accrued Liabilities: Expenses that has yet to be paid. ( eg Accured Wage Payable: In mid Jan, employees already worked for 2 weeks - Wage for 2 weeks will be recorded down under Accrued liabilities)
           • Accounts Receivable: A promise for future collection of cash
           • Notes Receivable: Similar to A/R, but more binding bc customers sign promissory notes to pay on certain dates & requires interest
           • Inventory: Stocked in Warehouse
           • Prepaid Expenses *NOT expense* : Benefits will be enjoyed in the future (E.g early rental payment etc) *Once benefit starts, this will go to Expenses*
           • Property, Plant and Equipment (PPE), Land, Buildings, Furniture and Fixtures
       • Sales of the products/services & Cost of Providing Sales
         • Revenues: Sales of products or services
           • Expenses: Cost of providing sales
         • Net Income = Revenue - Expense
       • Distribution to Stockholders
         • Dividends: Distribution to owners

3. Rules of Financing Accounting = Generally Accepted Accounting Principle (GAAP)

   • Managed by the Financial Accounting Standards Board (FASB)
     • Objective: Provide useful info to investors and creditors in making decisions

Imagens e arquivos do mapa