Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports...
-
Upload
benjamin-kennedy -
Category
Documents
-
view
223 -
download
1
Transcript of Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports...
![Page 1: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/1.jpg)
Chapter 1
![Page 2: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/2.jpg)
Define accounting vocabulary
![Page 3: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/3.jpg)
3Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 4: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/4.jpg)
End product of accounting process Report on business in monetary terms
4Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 5: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/5.jpg)
Define the users of financial information
![Page 6: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/6.jpg)
6Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 7: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/7.jpg)
Financial Accounting
Provides information for external decision makers◦ Investors◦ Creditors◦ Taxing authorities
Managerial Accounting
Provides information for internal decision makers◦ Managers◦ Individual business
owners
7Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 8: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/8.jpg)
Describe the accounting profession and the organizations that govern it
![Page 9: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/9.jpg)
Lucrative career with many opportunities Certified Public Accountants (CPAs)
◦ Pass qualifying exam◦ Meet education and/or experience requirements
9
Public Accounting –CPA Firms
Private Accounting –
Business & Other Organizations
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 10: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/10.jpg)
10Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 11: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/11.jpg)
11Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 12: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/12.jpg)
SEC requires companies to have financial statements examined by CPAs◦ Auditors will provide an opinion on financial
statements, if possible Recent accounting scandals hurt investor
confidence◦ U.S. Government passed the Sarbanes-Oxley Act
(SOX) Criminal offense to falsify financial statements
◦ Also created the Public Companies Accounting Oversight Board Watchdog of accounting profession
12Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 13: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/13.jpg)
13Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 14: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/14.jpg)
Identify the different types of business organizations
![Page 15: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/15.jpg)
15Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 16: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/16.jpg)
Proprietorship
Partnership Corporation LLC
Owners One Two or more Stockholders – usually many
Members
Life of Organization
Limited by owner’s choice or death
Limited by owner’s choice or death
Indefinite Indefinite
Liability of owners for business debts
Owner is personally liable
Partners are personally liable
Stockholders not personally liable
Members are not personally liable
16Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 17: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/17.jpg)
Delineate the distinguishing characteristics and organization of a proprietorship
![Page 18: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/18.jpg)
18Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 19: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/19.jpg)
19Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 20: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/20.jpg)
Incorporators obtain charter from the state Charter authorizes corporation to:
◦ Issue stock◦ Conduct business in accordance with state law
and the corporation’s bylaws Corporations begins to exist when stock is
issued◦ Stockholders vote on who will serve on Board of
Directors
20Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 21: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/21.jpg)
21Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 22: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/22.jpg)
Apply accounting concepts and principles
![Page 23: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/23.jpg)
Generally Accepted Accounting Principles◦ Rules that govern accounting◦ Based on a conceptual framework
Goal:◦ To provide useful information to those making
investment and lending decisions
23Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 24: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/24.jpg)
24Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 25: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/25.jpg)
25Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 26: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/26.jpg)
26Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 27: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/27.jpg)
Define and use the accounting equation
![Page 28: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/28.jpg)
28
EconomicResources
Claims toEconomicResources
Assets = Liabilities + Owner’s equity
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 29: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/29.jpg)
Economic resources that have a future benefit
Examples:◦ Cash◦ Accounts receivable◦ Merchandise inventory◦ Furniture◦ Land
29Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 30: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/30.jpg)
Liabilities◦ Debts payable to
outsiders◦ Examples:
Accounts payable Bank loans
Owners’ equity◦ Owners’ claims to
the assets of the business
◦ In a proprietorship owner’s equity
30Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 31: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/31.jpg)
31
Assets = Liabilities + Owner’s equity
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 32: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/32.jpg)
32
Capital
+ Net income
- Withdrawals
Revenues
- Expenses
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 33: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/33.jpg)
Amounts earned by delivering goods or services to customers◦ Sales revenue◦ Service revenue◦ Interest revenue◦ Dividend revenue
33Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 34: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/34.jpg)
Outflows of assets or increasing liabilities in the course of delivering goods or services to customers◦ Salary expense◦ Rent expense◦ Utilities expense◦ Interest expense
34Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 35: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/35.jpg)
Assets Liabilities Owner’s equity
Nice Cuts $ ? $25,000 $43,000
Love Dry Cleaners
85,000 ? 54,000
Hudson Gift and Cards
102,000 49,000 ?
35
?
?
?
![Page 36: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/36.jpg)
Assets Liabilities Owner’s
equity
Nice Cuts $ ? $25,000 $43,000
Love Dry Cleaners
85,000 ? 54,000
Hudson Gift and Cards
102,000 49,000 ?
36
$68,000
31,000
53,000
![Page 37: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/37.jpg)
Depict accounting for business transactions
![Page 38: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/38.jpg)
An event that affects the financial position of a particular entity
Can be recorded reliably Every transaction impacts at least two
items The accounting equation balances before
and after each transaction
38Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 39: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/39.jpg)
39
Assets Liabilities Owner’s Equity
Date CashAccounts receivable Supplies Land
Accounts payable
Marilyn Mansion, Capital
Bal 2,500 1,500 0 13,000
4,000 13,000
Assets = $17,000Liabilities & Equity =
$17,000
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 40: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/40.jpg)
40
Assets Liabilities Owner’s Equity
Date CashAccounts receivable Supplies Land
Accounts payable
Marilyn Mansion, Capital
Bal 2,500 1,500 - 13,000
4,000 13,000
(a) 10,000 10,000
Bal 12,500 1,500 - 13,000
4,000 23,000
Assets = $27,000Liabilities & Equity =
$27,000
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 41: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/41.jpg)
41
Assets Liabilities Owner‘s Equity
Date CashAccounts receivable Supplies Land
Accounts payable
Marilyn Mansion, Capital
Bal 12,500
1,500 - 13,000
4,000 23,000
(b) 1,100 1,100
Bal 13,600
1,500 - 13,000
4,000 24,100
Assets = $28,100Liabilities & Equity =
$28,100
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 42: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/42.jpg)
42
Date Cash Accounts receivable Supplies Land
Accounts payable
Marilyn Mansion, Capital
Bal 13,600 1,500 -
13,000
4,000 24,100
(c) (4,000)
(4,000)
Bal 9,600 1,500 -
13,000 0 24,100
Assets = $24,100Liabilities & Equity =
$24,100
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 43: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/43.jpg)
43
Date Cash Accounts receivable Supplies Land
Accounts payable
Marilyn Mansion, Capital
Bal 9,600 1,500 -
13,000 24,100
(d) 700 700
Bal 9,600 1,500 700
13,000 700 24,100
Assets = $24,800Liabilities & Equity =
$24,800
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 44: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/44.jpg)
44
Date Cash Accounts receivable Supplies Land
Accounts payable
Marilyn Mansion, Capital
Bal 9,600 1,500 700
13,000 700 24,100
(e) 600 (600)
Bal 10,200 900 700
13,000 700 24,100
Assets = $24,800Liabilities & Equity =
$24,800
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 45: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/45.jpg)
45
Date Cash
Accounts receivable Supplies Land
Accounts payable
Marilyn Mansion, Capital
Bal
10,200
900 700
13,000 700 24,100
(f)
1,700 1,700
Bal
11,900
900 700
13,000 700 25,800
Assets = $26,500Liabilities & Equity =
$26,500
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 46: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/46.jpg)
46
Date Cash
Accounts receivable
Supplies Land
Accounts payable
Marilyn Mansion, Capital
Bal
11,900
900 700
13,000 700 25,800
(g) 4,300 4,300
Bal
11,900 5,200
700
13,000 700 30,100
Assets = $30,800Liabilities & Equity =
$30,800
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 47: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/47.jpg)
47
Date Cash
Accounts receivable
Supplies Land
Accounts payable
Marilyn Mansion, Capital
Bal
11,900 5,200
700
13,000 700 30,100
(h)
(1,000) (1,000)
(300) (300)
Bal
10,600 5,200
700
13,000 700 28,800
Assets = $29,500Liabilities & Equity =
$29,500
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 48: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/48.jpg)
48
Date Cash
Accounts receivable Supplies Land
Accounts payable
Marilyn Mansion, Capital
Bal
10,600 5,200 700
13,000 700 28,800
(i)
100
(100)
Bal
10,700 5,200 600
13,000 700 28,800
Assets = $29,500Liabilities & Equity =
$29,500
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 49: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/49.jpg)
49
Date Cash Accounts receivable Supplies Land
Accounts payable
Marilyn Mansion, Capital
Bal 10,700 5,200 600
13,000 700 28,800 (j) (2,200) (2,200)
Bal 8,500 5,200 600
13,000 700 26,600
Assets = $27,300Liabilities & Equity =
$27,300
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 50: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/50.jpg)
Explain and prepare financial statements
![Page 51: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/51.jpg)
51Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 52: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/52.jpg)
Reports on profitability of business
52
Revenues minus Expenses
Net income
equals
If expenses > revenue =
net loss
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 53: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/53.jpg)
Summary of changes in owner’s capital during a specific period
53
Beginning Capital
Plus: Net income (or minus net loss)
Less: Withdrawals
Equals: Ending Capital
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 54: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/54.jpg)
Reports the entity’s assets, liabilities, and owner’s equity as of a specific date
54Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 55: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/55.jpg)
Reports cash receipts and cash payments during a period
55Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 56: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/56.jpg)
56
Goth Inc.
Income Statement
Month ended September 30, 2011
Revenue:
Service revenue $5,400
Expenses:
Rent expense $1,000
Advertising expense 300
Total expenses 1,300
Net income $4,100
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 57: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/57.jpg)
Copyright (c) 2009 Prentice Hall. All rights reserved. 57
Marilyn Mansion, Capital, September 1, 2011 13,000$ Add: Investments by owner 11,700 Net income 4,100
28,800$ Less: Withdrawals (2,200) Marilyn Mansion, Capital, September 30, 2011 26,600$
Month ended September 30, 2011
Goth Inc.Statement of Owner's Equity
![Page 58: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/58.jpg)
58
Goth Inc.
Balance Sheet
September 30, 2011
Assets Liabilities
Cash $8,500 Accounts payable $ 700
Accounts receivable 5,200
Supplies 600 Owner’s Equity
Land 13,000 Marilyn Mansion, Capital 26,600
Total assets 27,300 Total liabilities & owner’s equity
27,300
Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 59: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/59.jpg)
Use financial statements to evaluate business performance
![Page 60: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/60.jpg)
60Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 61: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/61.jpg)
61Copyright (c) 2009 Prentice Hall. All rights reserved.
![Page 62: Chapter 1. Define accounting vocabulary 1. Measures business activity 2. Processes data into reports 3. Communicates results to decision makers 3Copyright.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649edd5503460f94bee4de/html5/thumbnails/62.jpg)