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Financial Accounting – BUSN 127
Chapter 1 (Financial Statements and Business Decisions)
Full Study Notes

Sources of Financial Resources
•
•

Stockholders
Creditors

Business Activities
• Financial Activities
• Operating Activities
• Investing Activities
BALANCE SHEET – reports the financial position (amount of assets,
liabilities, and stockholders’ equity) of an accounting entity at a point in
time
...

STATEMENT OF STOCKHOLDERS’ EQUITY – reports the changes in each
of the company’s stockholders’ equity accounts, including the change in
the retained earnings balance caused by net income and dividends,
during the reporting period
...


Balance Sheet

Assets
Cash
Short-Term Investments
Accounts Receivable
Notes Receivable
Inventory (to be sold)
Supplies
Prepaid Expenses
Long-Term Investments
Equipment
Buildings
Land
Intangible
Liabilities
Accounts Payable
Accrued Expenses
Notes Payable
Taxes Payable
Unearned Revenue
Bonds Payable

Stockholders’ Equity
Common Stock
Retained Earnings

Balance Sheet Format
Name of the entity
Title of the statement
Specific date of the statement
Unit of measure
Resources controlled by the company
Amount of cash in the company’s bank accounts
Amounts owed by customers from prior sales
Ingredients and beverages ready for sale
Factories, production equipment, and land
Total amount of company’s resources
Sources of financing for company’s resources
Financing supplied by creditors
Amounts owed to suppliers for prior purchases
Amounts owed to banks on written debt contracts
Financing provided by stockholders
Amounts invested in the business by stockholders
Past earnings not distributed to stockholders
Total sources of financing for company’s resources

Accounting Equation
Assets = Liabilities + Stockholders’ Equity

Income Statement
Revenues
Cash and promises received from delivery of goods and
services
...

Examples:
Cost of Goods Sold
Wages Expense
Rent Expense
Depreciation Expense
Insurance Expense
Repair Expense
Income Tax Expense
The Income Statement Equation
Net Income = Revenues - Expenses

Income Statement Format
Name of the entity
Title of the statement
Accounting period
Unit of measure
Cash and promises received from sale of beverages
Cost to produce beverages sold
Other operating expenses (utilities, delivery costs, etc
...

Beginning Common Stock
+ Stock Issuance
Ending Common Stock
Retained Earnings
Past earnings not distributed to stockholders
...


Cash Flows from Investing Activities
Cash flows related to acquisition or sale of the company’s plant
and equipment and investments

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