Bulletsummary per chapter with the 11th edition of Financial Accounting by Needles & Powers - Chapter
How to use financial statements for business accounting? - BulletPoints 1
The definition of Accounting is an information system that measures, processes, and communicates financial information about an economic entity.
A business is an economic unit that aims to sell goods and services to customers at prices that will provide an adequate return to its providers.
2 major goals for all businesses; (1) Profitability:ability to earn enough income to attract and hold investment capital. (2) Liquidity: The ability to have enough cash to pay debts when they are due. Managers must take care that these goals are attained.
Companies pursue goals by three kind of activities;(1) Operating activities, which include buying, producing etc. (2) Investing activities and (3) Financing activities, like obtaining adequate funds.
A financial analysis is based on a financial statement. The outcome depends on the quality of performance measures.
Management accounting means providing information about financing, investing and operating for internal decision makers.
Financial accountants produce financial statements, their information is processed by bookkeeping and Management information system (MIS)
To keep a business going, investors are needed. Investors invest capital in a company and thus acquire partial ownership.
When investors pay money to the business and they want their money back, they become Creditors; people the business owes money to.
Business transactions are economic events that affect a business's financial position. These are all measured, this concept is called money measure.
Businesses are separate entities, they are distinct form its creditors and owners and has its own set of financial records.
There are 3 forms of business; (1) Sole proprietorship, one person is the owner and responsible for everything. (2) Partnership, two or more owners who share responsibility. (3) Corporations which are business units chartered by the state and is legally separate from its owners, the stockholders.
Stockholders are the owners of a company and all have a share of stock of the company.
The board of directors of a company decides on major business policies.
The income statement of a corporation consists of revenues and expenses. The outcome is the net income or net loss.
Statement of retained earnings: shows the changes in retained earnings over a period. It is equal to net income – dividends
Balance sheet: On the debit side are assets and on the credit side one can find Liabilities and Stockholders equity.
The formula: Assets = Liabilities + Stockholder's equity, is called the Accounting equation.
Statement of cash flows: shows all the cash flows of a certain time.
Generally accepted accounting principles (GAAP): a set of practices that have been developed to provide guidelines for financial accounting.
- How to use financial statements for business accounting? - Chapter 1
- How to analyze business transactions? - Chapter 2
- How to measure business income? - Chapter 3
- How do Financial Reporting and Analysis work? - Chapter 4
- What are the Operating Cycle and Merchandising Operations? - Chapter 5
- What do inventories consist of? - Chapter 6
- What do cash and receivables include? - Chapter 7
- What are the time value of money and current liabilities? - Chapter 8
- What are the long term assets? - Chapter 9
- What are long term liabilities? - Chapter 10
- What is contributed capital? - Chapter 11
- What is the statement of cash flows? - Chapter 12
- What are financial performant measurements? - Chapter 13
- What do investments consist of? - Chapter 14
- Bulletsummary per chapter with the 11th edition of Financial Accounting by Needles & Powers - Chapter
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