Create an account
role of accounting in business
provide info for users (e.g. for manager to use in operating business, for users who want to know about the economic performance of the business)
accounting as an info system - process
1) identify users, 2) assess their info needs, 3) design accounting system to meet their needs, 4) record economic data about business activities and events, 5) prepare accounting reports for users
business entity concept
accounting data is based on the business transactions only, not transactions of owner, creditors, etc.
types of business entities (ownership)
proprietorship, partnership, corporation, limited liability corporation
transaction: business bought supplies, agreed to pay supplier in future"
+A (supplies), +L (accounts payable)
transaction: business paid expenses
-A (cash), -E (expenses: wages expense, rent expense, utilities expense, miscellaneous expense, etc.)
transactions affected owner's equity
owner's investments (+), owner's withdrawals (-), revenues (+), expenses (-)
types of financial statements
income statement, statement of owner's equity, balance sheet, statement of cash flows
statement of cash flows
not focused on in this class, summary of cash receipts/payments for specific period
order of assets on balance sheet
order they will be converted into cash; cash, receivables, supplies, prepaid insurance ... land, buildings, equipment
three sections of statement of cash flows
operating activities, investing activities, financing activities
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