Accounting September 15 Class Notes- C02 - Google Docs PDF

Preview

Summary

Download Accounting September 15 Class Notes- C02 - Google Docs PDF

Description

September 15 Class Notes- C02 The Structure of Chapter 1 ● Accounting as the Language of Business- Module 1 ○ Defined accounting as an information systems and defined financial statements ○ Users of accounting information and their information needs ● Financial statements and their elements- Module 2 ○ Income Statement ■ Total income: Revenues and Gains ■ Total expenses: Expenses and Losses ■ Net income = total income - total expenses ○ Statement of Retained Earnings ■ Dividends are distributions of income to owners ■ Retained earnings is accumulated earnings after paying out dividends ■ Ending retained earnings = beginning retained earnings + net income (or minus net loss) - dividends ○ Balance Sheet ■ Assets ● Current assets: cash, accounts receivable, inventory, supplies, and prepaid expenses ● Property, Plant, and Equipment (PPE): land, buildings, furniture, machinery. Except for land, PPE are reported net of accumulated depreciation ● Investments ● Intangible Assets ■ Liabilities ● Current liabilities: accounts payable, notes payable, unearned revenues, and accrued liabilities (such as salaries payable) ● Long-term liabilities: notes payable, bonds payable, mortgage payable ■ Equity ● Capital: called common shares for corporations ● Retained earnings ■ Assets = liabilities + equity (the accounting equation) ○ Statement of Cash Flows- to be covered in Chapter 9 ● The preparation of financial statements- Module 3A ● The accounting equation and its applications- Module 3B ● Explain and apply underlying accounting concepts, assumptions, and principlesRead pages 20-24. We will refer to these concepts when encountered later in the term.

Net income = revenues - expenses 55,000 = revenues - (58,000 + 6,500 + 500) Revenues = 120,000

Beginning

Ending

Change

Assets

27,500

Liabilities

13,500

22,500

Equity

14,000

19,500

9,000

When companies earn revenues, they do not have to collect to recognize it When companies incur expenses, they do not have to pay to recognize it

Module 3B, Question 3 On January 1, 2020 Read Inc. had assets of $500,000 and Liabilities of $300,000. During the year, Read Inc. declared $25,000 in dividends and its ending Equity on December 31, 2020 was $320,000. There was no change in Read Inc.’s common shares for 2020. If Read Inc.’s expenses were $45,000, what was their revenues for 2020? Net income = revenues - expenses 145,000 = revenues - 45,000 Revenues = 190,000 Ending RE = beginning RE + net income - dividends Ending RE = beginning RE + net income - 25,000 Ending RE - beginning RE = net income - 25,000 120,000 = net income - 25,000 Net income = 120,000 + 25,000 = 145,000 Equity = common shares + RE Change in equity = change in common shares + change in RE 120,000 = 0 + change in RE Beginning Assets 500,000

Ending

Change

Liabilities 300,000 Equity 200,000

320,000

120,000

Net income = revenues - expenses Ending RE = beginning RE + net income - dividends 27,000 = net income - 14,000 Net income = 41,000 Change in equity Beginning

Ending

310,000

382,000

130,000

175,000

180,000

207,000

Change

Assets

Liabilities

Equity 27,000

Change in equity = change in common shares + change in RE Change in RE= 27,000...