Intro to Accounting Notes

Business Environment Accounting: The information system that measures business activities, processes the information Into reports, and communicates the results to decision makers. Two Major Fields of Accounting: 1 ) Financial Accounting: The field of accounting that focuses on providing information for external decision makers. 2) Managerial Accounting: The field of accounting that focuses on providing information for internal decision makers. Certified Public Accountants (Spas): Licensed professional accountants who serve the mineral public.Certified Management Accountants (Camas): Certified professionals who specialize in accounting and financial management knowledge that typically work for a single company. Financial Accounting Standards Board (FAST): private organization that oversees the creation and governance of accounting standards. Securities and Exchange Commission (SEC): the US government agency that oversees the US financial markets. Generally Accepted Accounting Principl es (GAP): the main US accounting rule book, created and governed by the FAST.Cost Principle: states that acquired assets and services should be recorded at their actual cost. Going Concern Assumption: assumes that the entity will remain in operation for the foreseeable future. Accounting Equation: Assets-Liableness + Equity Assets: an economic resource that is expected to benefit the business in the future. Liabilities: debts that are owed to creditors. Retained Earnings: capital earned by profitable operations off corporation that is not distributed to stockholders. Net Income: the result of operations that occurs when total revenues are greater Han total expenses.Revenues: amounts earned from delivering goods or services to customers. Expenses: the cost of selling goods or services. Steps to Analyze a Transaction Assets Liabilities + Equity (Contributed Capital & Retained Earnings) Cash + Acts Race + Supplies+Land = Acts Payable + Common Stock – Dividends + Revenue – Expenses 1) Identify the accounts & account type -Cash (Asset) & Common Stock (Equity) 2) Decide if each account increases or decreases 3) Determine if the accounting equation is in balanceAccounts Payable: a short term liability that will be paid in the future Accounts Receivable: business expects to receive cash in the future from customers for goods sold or services performed. 4 Types of Financial Statements 1) Income Statement: Reports net income/net loss of business for specific period 2) Statement of Retained Earnings: Reports how the company's retained earnings balance changed from the beginning to the end of the period. 3) Balance Sheet: Reports on the assets, liabilities, and stockholders' equity of the business as of a pacific date. ) Statement of Cash Flows: Reports on the business's cash receipts and cash payments for a specific period. Return on Assets (ROAR): measures how profitably a company uses its assets. Return on Assets = Net income/Average total assets Average Total Assets = Beginning total assets + ending total assets 12 4 Reasons Stockholders Equity Can Change: Stockholders equity is broken out into two components, contributed capital and retained earnings, as shown in the accounting equation. The basic component of contributed stock capital is stock.