Accounting Lesson 1 & Lesson 2 PDF

Preview

Summary

Here you will learn all about Lesson 1 and Lesson 2....

Description

Lesson 1  Accounting System- Used by business to: Analyze Transactions, Bookkeeping, Structure info to evaluate its health/performance  Accounting: a system for providing “quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions.” o Decision Process (in order): 1- Identify Issue > Gather Info > Identify Alternatives > Select Best Option  Accountant’s 2 Roles: Measure & Report results of business activities, Advise on company actions.  Capital: Comes from Investors, Creditors, Retained Business Earnings  Evaluation: Which role of accounting involves obtaining and using financial information to determine the financial health and performance of a business or product line? Lesson 2 

 

Management Accounting: INTERNAL, focuses on the information needed for planning, implementing plans, and controlling costs o Budgets, cost analyses, divisional performance reports o Internal stakeholders: Mgmt, Suppliers, customers, employees Financial Accounting: Reporting financial info to EXTERNAL sources 3 Primary Financial Statements: o 1 Balance Sheet- company’s resources (assets), obligations (liabilities), Owner’s equity ((difference of owned (assets) and owed (liabilities)) at that exact date/time.  Reports the resources, obligations, and the difference between what is owned and owed (owners’ equity) o 2 Income Statement- Reports Net income earned during a period.  Typically annually and quarterly. Portrays the results of operations of a company over time. o 3 Statement of Cash Flows- cash collected and paid out by: operating, investing, and financing activities. How it changed and why.  For the same period as the income statement. Represents the CHANGE in cash during a period of time. o Statement of Retained Earnings- shows accumulated profits or losses since the business started. (Not 1 of the 3 primary statements) o FA is used by federal, state, and local govt agencies. o External stakeholders: Lenders, Investors o Lenders (creditors) want to be repaid w/interest. o Investors want to know how much cash they can receive in the future....