WeyAP8eCh01Revised
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School
Çankaya University**We aren't endorsed by this school
Course
STAT 201
Subject
Accounting
Date
Dec 18, 2024
Pages
53
Uploaded by ProfessorTitaniumOpossum42
Chapter 1-1
Chapter 1-2CHAPTER CHAPTER 11ACCOUNTING IN ACCOUNTING IN ACTIONACTIONAccounting Principles, Eighth Edition
Chapter 1-31.Explain what accounting is.2.Identify the users and uses of accounting.3.Understand why ethics is a fundamental business concept.4.Explain generally accepted accounting principles and the cost principle.5.Explain the monetary unit assumption and the economic entity assumption.6.State the accounting equation, and define assets, liabilities, and owner’s equity.7.Analyze the effects of business transactions on the accounting equation.8.Understand the four financial statements and how they are prepared.Study ObjectivesStudy ObjectivesStudy ObjectivesStudy Objectives
Chapter 1-4Accounting in ActionAccounting in ActionAccounting in ActionAccounting in ActionEthics in Ethics in financial financial reportingreportingGenerally Generally accepted accepted accounting accounting principlesprinciplesAssumptionsAssumptionsWhat is What is Accounting?Accounting?What is What is Accounting?Accounting?The Building The Building Blocks of Blocks of AccountingAccountingThe Building The Building Blocks of Blocks of AccountingAccountingThe Basic The Basic Accounting Accounting EquationEquationThe Basic The Basic Accounting Accounting EquationEquationUsing the Using the Basic Basic Accounting Accounting EquationEquationUsing the Using the Basic Basic Accounting Accounting EquationEquationFinancial Financial StatementsStatementsFinancial Financial StatementsStatementsThree Three activitiesactivitiesWho uses Who uses accounting accounting datadataAssetsAssetsLiabilitiesLiabilitiesOwner’s Owner’s equityequityTransaction Transaction analysisanalysisSummary of Summary of transactionstransactionsIncome Income statementstatementOwner’s Owner’s equity equity statementstatementBalance Balance sheetsheetStatement of Statement of cash flowscash flows
Chapter 1-5What is Accounting?What is Accounting?What is Accounting?What is Accounting?LO 1 Explain what accounting is.LO 1 Explain what accounting is.The purpose of accounting is to:(1)(1)identifyidentify, recordrecord, and communicatecommunicate the economic events of an(2)organization to(3)interested users.
Chapter 1-6Three ActivitiesWhat is Accounting?What is Accounting?What is Accounting?What is Accounting?LO 1 Explain what accounting is.LO 1 Explain what accounting is.Illustration 1-1Accounting processThe accounting process includes the bookkeeping function.
Chapter 1-7BookkeepingBookkeepingusually involves only the usually involves only the recording of economic events. It is therefore just recording of economic events. It is therefore just one part of the accounting process. one part of the accounting process. In total, In total, accountingaccountinginvolves the entire process involves the entire process of identifying, recording, and communicating of identifying, recording, and communicating economic events.economic events.
Chapter 1-8ManagementThere are two broad groups of users of financial information: internal users and external users.Human ResourcesIRSLabor UnionsSECMarketingFinanceInvestorsCreditorsWho Uses Accounting Data?Who Uses Accounting Data?Who Uses Accounting Data?Who Uses Accounting Data?LO 2 Identify the users and uses of accounting.LO 2 Identify the users and uses of accounting.CustomersInternal UsersExternal Users
Chapter 1-9Common Questions AskedUser1. Can we afford to give our employees a pay raise?Human Resources2. Did the company earn a satisfactory income?3. Do we need to borrow in the near future?4. Is cash sufficient to pay dividends to the stockholders?5. What price for our product will maximize net income?Who Uses Accounting Data?Who Uses Accounting Data?Who Uses Accounting Data?Who Uses Accounting Data?LO 2 Identify the users and uses of accounting.LO 2 Identify the users and uses of accounting.6. Will the company be able to pay its short-term debts?InvestorsManagementFinanceMarketingCreditors
Chapter 1-10Discussion QuestionLO 3 Understand why ethics is a fundamental business conceptLO 3 Understand why ethics is a fundamental business concept.Q1. “Accounting is ingrained in our society and it is vital to our economic system.” Do you agree? Explain.See notes page for discussionWho Uses Accounting Data?Who Uses Accounting Data?Who Uses Accounting Data?Who Uses Accounting Data?
Chapter 1-11The Building Blocks of AccountingThe Building Blocks of AccountingThe Building Blocks of AccountingThe Building Blocks of AccountingEthics In Financial ReportingLO 3 Understand why ethics is a fundamental business conceptLO 3 Understand why ethics is a fundamental business concept.Standards of conduct by which one’s actions are judged as right or wrong, honest or dishonest, fair or not fair, are Ethics.Recent financial scandals include: Enron, WorldCom, HealthSouth, AIG, and others.Congress passedSarbanes-Oxley Act of 2002. Effective financial reporting depends on sound ethical behavior.
Chapter 1-12Ethics are the standards of conduct by which one's actions are judged as: a.right or wrong. b.honest or dishonest. c.fair or not fair. d.all of these options.Review QuestionReview QuestionEthicsEthicsEthicsEthicsLO 3 Understand why ethics is a fundamental business conceptLO 3 Understand why ethics is a fundamental business concept.
Chapter 1-13Ethics are the standards of conduct by which one's actions are judged as: a.right or wrong. b.honest or dishonest. c.fair or not fair. d.all of these options.Review QuestionReview QuestionEthicsEthicsEthicsEthicsLO 3 Understand why ethics is a fundamental business conceptLO 3 Understand why ethics is a fundamental business concept.
Chapter 1-14Various users need financial informationVarious users need financial informationThe accounting profession has attempted to develop a set of standards that are generally accepted and universally practiced.Financial StatementsBalance SheetIncome StatementStatement of Owner’s EquityStatement of Cash FlowsNote DisclosureFinancial StatementsBalance SheetIncome StatementStatement of Owner’s EquityStatement of Cash FlowsNote DisclosureGenerally Accepted Generally Accepted Accounting Principles Accounting Principles (GAAP)(GAAP)Generally Accepted Generally Accepted Accounting Principles Accounting Principles (GAAP)(GAAP)The Building Blocks of AccountingThe Building Blocks of AccountingThe Building Blocks of AccountingThe Building Blocks of AccountingLO 4 Explain generally accepted accounting principles and the cost principle.LO 4 Explain generally accepted accounting principles and the cost principle.
Chapter 1-15Organizations Involved in Standard Setting:Securities and Exchange Commission (SEC)Financial Accounting Standards Board (FASB)International Accounting Standards Board (IASB)LO 4 Explain generally accepted accounting principles and the cost principle.LO 4 Explain generally accepted accounting principles and the cost principle.The Building Blocks of AccountingThe Building Blocks of AccountingThe Building Blocks of AccountingThe Building Blocks of Accountinghttp://www.fasb.org/http://www.sec.gov/http://www.iasb.org/
Chapter 1-16Cost Principle (Historical)– dictates that companies record assets at their cost.Issues:Reported at cost when purchased and also over the time the asset is held.Cost easily verified, whereas market value is often subjective. Fair value information may be more useful. The Building Blocks of AccountingThe Building Blocks of AccountingThe Building Blocks of AccountingThe Building Blocks of AccountingLO 4 Explain generally accepted accounting principles and the cost principle.LO 4 Explain generally accepted accounting principles and the cost principle.
Chapter 1-17Monetary Unit Assumption– include in the accounting records only transaction data that can be expressed in terms of money.Economic Entity Assumption– requires that activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities.Proprietorship.Partnership. Corporation.AssumptionsAssumptionsAssumptionsAssumptionsLO 5 Explain the monetary unit assumption and the economic LO 5 Explain the monetary unit assumption and the economic entity assumption.entity assumption.Forms of Business Ownership
Chapter 1-18ProprietorshipPartnershipCorporationOwned by two or more Owned by two or more persons.persons.Often retail and Often retail and service-type businessesservice-type businessesGenerally unlimited Generally unlimited personal liabilitypersonal liabilityPartnership agreementPartnership agreementOwnership divided Ownership divided into shares of stockinto shares of stockSeparate legal entity Separate legal entity organized under state organized under state corporation lawcorporation lawLimited liabilityLimited liabilityForms of Business OwnershipForms of Business OwnershipForms of Business OwnershipForms of Business OwnershipGenerally owned by Generally owned by one person.one person.Often small service-Often small service-type businessestype businessesOwner receives any Owner receives any profits, suffers any profits, suffers any losses, and is losses, and is personally liable for all personally liable for all debts.debts.LO 5 Explain the monetary unit assumption and the economic LO 5 Explain the monetary unit assumption and the economic entity assumption.entity assumption.
Chapter 1-19Combining the activities of Kellogg and General Mills would violate the a.cost principle. b.economic entity assumption. c.monetary unit assumption. d.ethics principle.AssumptionsAssumptionsAssumptionsAssumptionsLO 5 Explain the monetary unit assumption and the economic LO 5 Explain the monetary unit assumption and the economic entity assumption.entity assumption.Review QuestionReview Question
Chapter 1-20Combining the activities of Kellogg and General Mills would violate the a.cost principle. b.economic entity assumption. c.monetary unit assumption. d.ethics principle.AssumptionsAssumptionsAssumptionsAssumptionsLO 5 Explain the monetary unit assumption and the economic LO 5 Explain the monetary unit assumption and the economic entity assumption.entity assumption.Review QuestionReview Question
Chapter 1-21A business organized as a separate legal entity under state law having ownership divided into shares of stock is a a.proprietorship. b.partnership. c.corporation. d.sole proprietorship.LO 5 Explain the monetary unit assumption and the economic LO 5 Explain the monetary unit assumption and the economic entity assumption.entity assumption.Forms of Business OwnershipForms of Business OwnershipForms of Business OwnershipForms of Business OwnershipReview QuestionReview Question
Chapter 1-22A business organized as a separate legal entity under state law having ownership divided into shares of stock is a a.proprietorship. b.partnership. c.corporation. d.sole proprietorship.LO 5 Explain the monetary unit assumption and the economic LO 5 Explain the monetary unit assumption and the economic entity assumption.entity assumption.Forms of Business OwnershipForms of Business OwnershipForms of Business OwnershipForms of Business OwnershipReview QuestionReview Question
Chapter 1-23AssetsAssetsAssetsAssetsLiabilitiesLiabilitiesLiabilitiesLiabilitiesOwner’s Owner’s EquityEquityOwner’s Owner’s EquityEquity=+Provides the underlying framework for recording and summarizing economic events.Assets are claimed by either creditors or owners.Claims of creditors must be paid before ownership claims.The Basic Accounting EquationThe Basic Accounting EquationThe Basic Accounting EquationThe Basic Accounting EquationLO 6 LO 6 State the accounting equation, and define assets, liabilities, State the accounting equation, and define assets, liabilities, and owner’s equity.and owner’s equity.
Chapter 1-24AssetsAssetsAssetsAssetsLiabilitiesLiabilitiesLiabilitiesLiabilitiesOwner’s Owner’s EquityEquityOwner’s Owner’s EquityEquity=+Provides the underlying framework for recording and summarizing economic events.The Basic Accounting EquationThe Basic Accounting EquationThe Basic Accounting EquationThe Basic Accounting EquationLO 6 LO 6 State the accounting equation, and define assets, liabilities, State the accounting equation, and define assets, liabilities, and owner’s equity.and owner’s equity.Resources a business owns.Provide future services or benefits.Cash, Supplies, Equipment, etc.AssetsAssetsAssetsAssets
Chapter 1-25AssetsAssetsAssetsAssetsLiabilitiesLiabilitiesLiabilitiesLiabilitiesOwner’s Owner’s EquityEquityOwner’s Owner’s EquityEquity=+Provides the underlying framework for recording and summarizing economic events.The Basic Accounting EquationThe Basic Accounting EquationThe Basic Accounting EquationThe Basic Accounting EquationLO 6 LO 6 State the accounting equation, and define assets, liabilities, State the accounting equation, and define assets, liabilities, and owner’s equity.and owner’s equity.Claims against assets (debts and obligations).Creditors - party to whom money is owed.Accounts payable, Notes payable, etc.LiabilitiesLiabilitiesLiabilitiesLiabilities
Chapter 1-26AssetsAssetsAssetsAssetsLiabilitiesLiabilitiesLiabilitiesLiabilitiesOwner’s Owner’s EquityEquityOwner’s Owner’s EquityEquity=+Provides the underlying framework for recording and summarizing economic events.The Basic Accounting EquationThe Basic Accounting EquationThe Basic Accounting EquationThe Basic Accounting EquationLO 6 LO 6 State the accounting equation, and define assets, liabilities, State the accounting equation, and define assets, liabilities, and owner’s equity.and owner’s equity.Ownership claim on total assets.Referred to as residual equity.Capital, Drawings, etc. (Proprietorship or Partnership).Owner’s EquityOwner’s EquityOwner’s EquityOwner’s Equity
Chapter 1-27Owners’ EquityOwners’ EquityOwners’ EquityOwners’ EquityRevenuesresult from business activities entered into for the purpose of earning income.Common sources of revenue are: sales, fees, services, commissions, interest, dividends, royalties, and rent.Illustration 1-6LO 6 LO 6 State the accounting equation, and define assets, liabilities, State the accounting equation, and define assets, liabilities, and owner’s equity.and owner’s equity.
Chapter 1-28Owners’ EquityOwners’ EquityOwners’ EquityOwners’ EquityExpenses are the cost of assets consumedor services usedin the process of earning revenue.Common expenses are: salaries expense, rent expense, utilities expense, tax expense, etc.Illustration 1-6LO 6 LO 6 State the accounting equation, and define assets, liabilities, State the accounting equation, and define assets, liabilities, and owner’s equity.and owner’s equity.
Chapter 1-29Using The Basic Accounting EquationUsing The Basic Accounting EquationUsing The Basic Accounting EquationUsing The Basic Accounting EquationTransactionsare a business’s economic events recorded by accountants.May be external or internal.Not all activities represent transactions.Each transaction has a dual effect on the accounting equation.LO 7 LO 7 Analyze the effects of business transactions on the accounting Analyze the effects of business transactions on the accounting equation.equation.
Chapter 1-30Q1-15:Q1-15:Are the following events recorded in the accounting records?EventSupplies are purchased on account.CriterionIs the financial position (assets, liabilities, or owner’s equity) of the company changed?LO 7 LO 7 Analyze the effects of business transactions on the accounting Analyze the effects of business transactions on the accounting equation.equation.An employee is hired.Owner withdraws cash for personal use.Record/ Don’t RecordTransactions (Question?)Transactions (Question?)Transactions (Question?)Transactions (Question?)
Chapter 1-31Discussion QuestionQ18. In February 2008, Paula King invested an additional $10,000 in her business, King’s Pharmacy, which is organized as a proprietorship. King’s accountant, Lance Jones, recorded this receipt as an increase in cash and revenues. Is this treatment appropriate? Why or why not?See notes page for discussionTransactionsTransactionsTransactionsTransactionsLO 7 LO 7 Analyze the effects of business transactions on the accounting Analyze the effects of business transactions on the accounting equation.equation.
Chapter 1-32P1-1A:P1-1A:Barone’s Repair Shop was started on May 1 by Nancy. Prepare a tabular analysis of the following transactions for the month of May.Transactions (Problem)Transactions (Problem)Transactions (Problem)Transactions (Problem)+10,0001.+10,000CashAccounts ReceivableEquipmentAccounts PayableBarone, CapitalLO 7 LO 7 Analyze the effects of business transactions on the accounting Analyze the effects of business transactions on the accounting equation.equation.++=+1. Invested $10,000 cash to start the repair shop.InvestmentAssetsLiabilitiesEquity
Chapter 1-33Transactions (Problem)Transactions (Problem)Transactions (Problem)Transactions (Problem)+10,0001.+10,000CashAccounts ReceivableEquipmentAccounts PayableBarone, CapitalLO 7 LO 7 Analyze the effects of business transactions on the accounting Analyze the effects of business transactions on the accounting equation.equation.2. Purchased equipment for $5,000 cash.-5,0002.+5,000++=+InvestmentAssetsLiabilitiesEquity
Chapter 1-34Transactions (Problem)Transactions (Problem)Transactions (Problem)Transactions (Problem)+10,0001.+10,000CashAccounts ReceivableEquipmentAccounts PayableLO 7 LO 7 Analyze the effects of business transactions on the accounting Analyze the effects of business transactions on the accounting equation.equation.3. Paid $400 cash for May office rent.-5,0002.+5,000++=+-4003.-400ExpenseBarone, CapitalInvestmentAssetsLiabilitiesEquity
Chapter 1-35Transactions (Problem)Transactions (Problem)Transactions (Problem)Transactions (Problem)+10,0001.+10,000CashAccounts ReceivableEquipmentAccounts PayableLO 7 LO 7 Analyze the effects of business transactions on the accounting Analyze the effects of business transactions on the accounting equation.equation.4. Received $5,100 from customers for repair service.-5,0002.+5,000++=+-4003.-400Expense+5,1004.+5,100RevenueBarone, CapitalInvestmentAssetsLiabilitiesEquity
Chapter 1-36Transactions (Problem)Transactions (Problem)Transactions (Problem)Transactions (Problem)+10,0001.+10,000CashAccounts ReceivableEquipmentAccounts PayableLO 7 LO 7 Analyze the effects of business transactions on the accounting Analyze the effects of business transactions on the accounting equation.equation.5. Withdrew $1,000 cash for personal use.-5,0002.+5,000++=+-4003.-400Expense+5,1004.+5,100Revenue-1,0005.-1,000DrawingsBarone, CapitalInvestmentAssetsLiabilitiesEquity
Chapter 1-37Transactions (Problem)Transactions (Problem)Transactions (Problem)Transactions (Problem)+10,0001.+10,000CashAccounts ReceivableEquipmentAccounts PayableLO 7 LO 7 Analyze the effects of business transactions on the accounting Analyze the effects of business transactions on the accounting equation.equation.6. Paid part-time employee salaries of $2,000.-5,0002.+5,000++=+-4003.-400Expense+5,1004.+5,100Revenue-1,0005.-1,000Drawings-2,0006.-2,000ExpenseBarone, CapitalInvestmentAssetsLiabilitiesEquity
Chapter 1-38Transactions (Problem)Transactions (Problem)Transactions (Problem)Transactions (Problem)+10,0001.+10,000CashAccounts ReceivableEquipmentAccounts PayableLO 7 LO 7 Analyze the effects of business transactions on the accounting Analyze the effects of business transactions on the accounting equation.equation.7. Incurred $250 of advertising costs, on account.-5,0002.+5,000++=+-4003.-400Expense+5,1004.+5,100Revenue-1,0005.-1,000Drawings-2,0006.-2,000Expense+2507.-250ExpenseBarone, CapitalInvestmentAssetsLiabilitiesEquity
Chapter 1-39Transactions (Problem)Transactions (Problem)Transactions (Problem)Transactions (Problem)+10,0001.+10,000CashAccounts ReceivableEquipmentAccounts PayableLO 7 LO 7 Analyze the effects of business transactions on the accounting Analyze the effects of business transactions on the accounting equation.equation.8. Provided $750 of repair services on account.-5,0002.+5,000++=+-4003.-400Expense+5,1004.+5,100Revenue-1,0005.-1,000Drawings-2,0006.-2,000Expense+2507.-250Expense+7508.+750RevenueBarone, CapitalInvestmentAssetsLiabilitiesEquity
Chapter 1-40Transactions (Problem)Transactions (Problem)Transactions (Problem)Transactions (Problem)+10,0001.+10,000CashAccounts ReceivableEquipmentAccounts PayableLO 7 LO 7 Analyze the effects of business transactions on the accounting Analyze the effects of business transactions on the accounting equation.equation.9. Collected $120 cash for services previously billed.-5,0002.+5,000++=+-4003.-400Expense+5,1004.+5,100Revenue-1,0005.-1,000Drawings-2,0006.-2,000Expense+2507.-250Expense+7508.+750Revenue+1209.-120Barone, CapitalInvestmentAssetsLiabilitiesEquity6,820 + 630 + 5,000 =250 + 12,200
Chapter 1-41Companies prepare four financial statements from the summarized accounting data:Companies prepare four financial statements from the summarized accounting data:Balance SheetIncome StatementStatement of Cash FlowsOwner’s Equity StatementFinancial StatementsFinancial StatementsFinancial StatementsFinancial StatementsLO 8 Understand the four financial statements and how they are prepared.LO 8 Understand the four financial statements and how they are prepared.
Chapter 1-42Net income will result during a time period when:a.assets exceed liabilities.b.assets exceed revenues.c.expenses exceed revenues.d.revenues exceed expenses.Financial StatementsFinancial StatementsFinancial StatementsFinancial StatementsLO 8 Understand the four financial statements and how they are prepared.LO 8 Understand the four financial statements and how they are prepared.Review QuestionReview Question
Chapter 1-43Income StatementFinancial StatementsFinancial StatementsFinancial StatementsFinancial StatementsLO 8 Understand the four financial statements and how they are prepared.LO 8 Understand the four financial statements and how they are prepared.Reports the revenues and expenses for a specific period of time.Net income – revenues exceed expenses.Net loss – expenses exceed revenues.Re ve n u e s :S e r vic e r e ve n u e5 ,8 5 0$ Ex p e n s e s :S a la r y e x p e n s e2 ,0 0 0Re n t e x p e n s e4 0 0A d ve r t is in g e x p e n s e2 5 0T o t a l e x p e n s e s2 ,6 5 0N e t in c o m e3 ,2 0 0$ Ba r o n e ’s Re p a ir S h o p I n c o m e S t a t e m e n tFo r t h e M o n t h En d e d M a y 3 1 , 2 0 0 8
Chapter 1-44Re ve n u e s :S e r vic e r e ve n u e5 ,8 5 0$ Ex p e n s e s :S a la r y e x p e n s e2 ,0 0 0Re n t e x p e n s e4 0 0A d ve r t is in g e x p e n s e2 5 0T o t a l e x p e n s e s2 ,6 5 0N e t in c o m e3 , 2 0 0$ B a r o n e ’s R e p a ir S h o p I n c o m e S t a t e m e n tFo r t h e M o n t h En d e d M a y 3 1 , 2 0 0 8Income StatementFinancial StatementsFinancial StatementsFinancial StatementsFinancial StatementsLO 8 Understand the four financial statements and how they are prepared.LO 8 Understand the four financial statements and how they are prepared.Ba r o n e ' s , C a p it a l M a y 1-$ A d d : I n ve s t m e n t10 ,0 0 0N e t in c o m e3 , 2 0 013 ,2 0 0Le s s : D r a w in g s1,0 0 0Ba r o n e ' s , C a p it a l M a y 3 112 ,2 0 0$ Ba r o n e ’s Re p a ir S h o p O wn e r ' s Eq u it y S t a t e m e n tF o r t h e M o nt h End e d M a y 3 1 , 2 0 0 8Owner’s Equity StatementNet income is needed to determine the ending balance in owner’s equity.
Chapter 1-45Financial StatementsFinancial StatementsFinancial StatementsFinancial StatementsLO 8 Understand the four financial statements and how they are prepared.LO 8 Understand the four financial statements and how they are prepared.B a r o n e ' s , C a p it a l M a y 1-$ A d d : I n ve s t m e n t10 ,0 0 0N e t in c o m e3 ,2 0 013 ,2 0 0Le s s : D r a w in g s1,0 0 0B a r o n e ' s , C a p it a l M a y 3 112 ,2 0 0$ B a r o n e ’s Re p a ir S h o p O wn e r ' s Eq u it y S t a t e m e n tF o r t h e M o nt h End e d M a y 3 1 , 2 0 0 8Owner’s Equity StatementStatement indicates the reasons why owner’s equity has increased or decreased during the period.
Chapter 1-46Financial StatementsFinancial StatementsFinancial StatementsFinancial StatementsLO 8 Understand the four financial statements and how they are prepared.LO 8 Understand the four financial statements and how they are prepared.Ba r o ne ' s , C a p it a l M a y 1-$ A d d : I n ve s t m e n t10 ,0 0 0N e t in c o m e3 ,2 0 013 ,2 0 0Le s s : D r a w in g s1,0 0 0Ba r o ne ' s , C a p it a l M a y 3 11 2 , 2 0 0$ Ba r o n e ’s Re p a ir S h o p O wn e r ' s Eq u it y S t a t e m e n tF o r t h e M o nt h End e d M a y 3 1 , 2 0 0 8Owners’ Equity StatementA s s e t sC a s h6 ,8 2 0$ A c c o u n t s r e c e iva b le6 3 0Eq u ip m e n t5 ,0 0 0T o t a l a s s e t s12 ,4 5 0$ Lia b ilit ie sA c c o u n t s p a y a b le2 5 0$ O wn e r ' s Eq u it yB a r o n e ' s , c a p it a l1 2 , 2 0 0T o t a l lia b . & e q u it y12 ,4 5 0$ B a la n c e S h e e tBa r o n e ’s R e p a ir S h o p M a y 3 1 , 2 0 0 8The ending balance in owner’s equity is needed in preparing the balance sheetBalance Sheet
Chapter 1-47Balance SheetFinancial StatementsFinancial StatementsFinancial StatementsFinancial StatementsLO 8 Understand the four financial statements and how they are prepared.LO 8 Understand the four financial statements and how they are prepared.Reports the assets, liabilities, and owner’s equity at a specific date.Assets listed at the top, followed by liabilities and owner’s equity.Total assets must equal total liabilities and owner’s equity.A s s e t sC a s h6 ,8 2 0$ A c c o u n t s r e c e iva b le6 3 0Eq u ip m e n t5 ,0 0 0T o t a l a s s e t s12 ,4 5 0$ Lia b ilit ie sA c c o u n t s p a y a b le2 5 0$ O wn e r ' s Eq u it yBa r o n e ' s , c a p it a l12 ,2 0 0T o t a l lia b . & e q u it y12 ,4 5 0$ Ba la n c e S h e e tBa r o n e ’s Re p a ir S h o p M a y 3 1 , 2 0 0 8
Chapter 1-48Balance SheetFinancial StatementsFinancial StatementsFinancial StatementsFinancial StatementsLO 8 Understand the four financial statements and how they are prepared.LO 8 Understand the four financial statements and how they are prepared.A s s e t sC a s h6 , 8 2 0$ A c c o u n t s r e c e iva b le6 3 0Eq u ip m e n t5 ,0 0 0T o t a l a s s e t s12 ,4 5 0$ Lia b ilit ie sA c c o u n t s p a y a b le2 5 0$ O wn e r ' s Eq u it yBa r o n e ' s , c a p it a l12 ,2 0 0T o t a l lia b . & e q u it y12 ,4 5 0$ Ba la n c e S h e e tB a r o n e ’s Re p a ir S h o p M a y 3 1 , 2 0 0 8C a s h fl o w f r o m o p e r a t in g a c t ivit ie sC a s h r e c e ip t s f r o m r e ve n u e s5 ,2 2 0$ C a s h p a id f o r e x p e n s e s( 2 ,4 0 0 )C a s h p r o vid e d b y o p e r a t io n s2 ,8 2 0C a s h fl o w f r o m in ve s t in g a c t ivit it e sPu r c h a s e o f e q u ip m e n t( 5 ,0 0 0 )C a s h fl o w f r o m fi n a n c in g a c t ivit ie sI n ve s t m e n t b y o w n e r s10 ,0 0 0D r a w in g s b y o w n e r s( 1,0 0 0 )C a s h p r o vid e d b y fi n a n c in g9 ,0 0 0N e t in c r e a s e in c a s h6 ,8 2 0C a s h b a la n c e , M a y 1-C a s h b a la n c e , M a y 3 16 , 8 2 0$ S t a t e m e n t o f C a s h F lo wsBa r o n e ’s Re p a ir S h o p F o r t h e M o nt h End e d M a y 3 1 , 2 0 0 8Statement of Cash Flows
Chapter 1-49Financial StatementsFinancial StatementsFinancial StatementsFinancial StatementsLO 8 Understand the four financial statements and how they are prepared.LO 8 Understand the four financial statements and how they are prepared.C a s h fl o w f r o m o p e r a t in g a c t ivit ie sC a s h r e c e ip t s f r o m c u s t o m e r s5 ,2 2 0$ C a s h p a id f o r e x p e n s e s( 2 ,4 0 0 )C a s h p r o vid e d b y o p e r a t io n s2 ,8 2 0C a s h fl o w f r o m in ve s t in g a c t ivit ie sPu r c h a s e o f e q u ip m e n t( 5 ,0 0 0 )C a s h fl o w f r o m fi n a n c in g a c t ivit ie sI n ve s t m e n t b y o w n e r s10 ,0 0 0D r a w in g s b y o w n e r s( 1,0 0 0 )C a s h p r o vid e d b y fi n a n c in g9 ,0 0 0N e t in c r e a s e in c a s h6 ,8 2 0C a s h b a la n c e , M a y 1-C a s h b a la n c e , M a y 3 16 ,8 2 0$ S t a t e m e n t o f C a s h F lo wsBa r o n e ’s R e p a ir S h o p F o r t h e M o n t h En d e d M a y 3 1 , 2 0 0 8Statement of Cash FlowsInformation for a specific period of time.Answers the following:1.Where did cash come from?2.What was cash used for?3.What was the change in the cash balance?
Chapter 1-50Which of the following financial statements is prepared as of a specific date? a.Balance sheet. b.Income statement. c.Owner's equity statement. d.Statement of cash flows.Financial StatementsFinancial StatementsFinancial StatementsFinancial StatementsLO 8 Understand the four financial statements and how they are prepared.LO 8 Understand the four financial statements and how they are prepared.Review QuestionReview Question
Chapter 1-51Discussion QuestionQ19. “A company’s net income appears directly on the income statement and the owner’s equity statement, and it is included indirectly in the company’s balance sheet.” Do you agree? Explain.See notes page for discussionFinancial StatementsFinancial StatementsFinancial StatementsFinancial StatementsLO 8 Understand the four financial statements and how they are prepared.LO 8 Understand the four financial statements and how they are prepared.
Chapter 1-52Forensic AccountingCareers with insurance companies and law offices to conduct investigations into theft and fraud.Opportunities in GovernmentCareers with the IRS, the FBI, the SEC, and in public colleges and universities.Private AccountingCareers in industry working in cost accounting, budgeting, accounting information systems, and taxation.LO 9 Explain the career opportunities in accounting.LO 9 Explain the career opportunities in accounting.Accounting Career OpportunitiesAccounting Career OpportunitiesAccounting Career OpportunitiesAccounting Career OpportunitiesPublic AccountingCareers in auditing and taxation serving the general public.
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