Financial Accounting: For external decision makers (this course's focus)

Managerial Accounting: For internal decision makers

4 Basic Financial Statements

Statement of Financial Position (Balance Sheet); Earnings; Change in Equity; Cash Flows

Financial Position (Balance Sheet): Owned economic resources and their sources

• Specific point in time
• Assets = Liabilities + Shareholders' Equity

Assets: Cash, inventory, buildings, etc. (receivable)

Liabilities: Debts from loans/credits (payable)

Shareholders' Equity: Owners' financing, reinvested earnings

• Contributed Capital: Investment from shareholders
• Retained Earnings: Profits reinvested into business

Earnings (Income Statement): Measure of performance

• During accounting period
• Revenues - Expenses = Net Earnings

Cost of Goods Sold: ****Costs associated with manufacturing the product

Cost of Sales: Dollar amount of resources used up during the period

Changes in Equity (Retained Earnings): Shareholder equity diff

• During accounting period
• Initial Retained Earnings + Net Earnings - Dividends = Ending Retained Earnings

Cash Flows: Cash from operating and used for investing/financing

• During accounting period
• CFO + CFI + CFF = Change in Cash

CFOperating: Generated earnings

CFInvesting: Acquisition/sale of company property/plant/equip/investments

CFFinancing: Receipts/payments to/from investors/creditors (excepting suppliers)

Types of Business Entities

Pros of Corporation:

• Limited liability - can't lose more than you pay
• Easy to transfer ownership through shares
• Can raise money by selling shares

Cons:

• Shareholders have relatively little control
• Complex reporting procedures required by governments
• Double taxation (once on earnings, once on dividends distributed to shareholders)

Accrual: Record revenue/expenses when the transaction occurs, rather than when the payment is made (which may be in the future)

Equipment Current Cost = Equipment less Depreciation

Example Statement of Financial Position

Example Statement of Earnings

Example Statement of Changes in Equity

Example Statement of Cash Flows

Relationship of the 4 Statements

IFRS Shit

AcSB Shit