Provides info to current or future investors or creditors and government regulatory bodies by using historical statements.

1. Balance sheet
2. Income statement
3. Statement of cash flows

Management Accounting

For internal decision makers like company managers.

Detailed reports that may include future budgets and forecasts as well as historical data. Usually not available to the public.

Entity

 Financial Statements

Business docs that repot on a business in monetary terms.

• Income statement
•  Balance sheet.
• Statement of owner's equity.
• Statement of cash flows.

Financial Accounting Standards Board (FASB)

1. Provides accounting standards in the US.
2. Private (non-governmental) but subject to some political influence via the SEC.
3. Formed in 1973.

1. Proprietorship
2. Partnership
3. Corporation
4. Limited-Liability partnership (LLP) and limited-liability company (LLC)

 Proprietorship (definition)

Partnership (definition)

• A business owned by stockholders/shareholders (the people who own shares of stock in the business).
• The state must approve its article of incorporation and the first share of stock must be issued before it becomes  a corporation.
• If the corporation goes bankrupt, lenders cannot take the personal assets of the stockholders. 
• Separate paid-in capital from retained earnings.

 Limited-liability partnership (LLP)

and

Limited-liability company (LLC)

• LLP: Each partner is liable only for his actions or those under his control.
• LLC: The business, not the members of it, is liable for the company's debts.

1. The Business Entity Principle
2. The Cost Principle
3. The Objectivity Principle
4. The Continuing-concern Principle
5. The Stable Dollar Principle

1. Assets
2. Liabilities
3. Equity
4. Revenue
5. Expenses

1. 100-199: Assets
2. 200-299: Liabilities
3. 300-399: Owner's Equity
4. 400-499: Revenues
5. 500-599: Expenses

If the difference between debits and credits is double one of the account balances, there is an error in posting to the wrong side of the account (debit instead of credit or vice versa).

Transactions that affect net income or revenues and expenses.
Cash in: Selling goods or services.
Cash out: Operating expenses, rent, wages, insurance, purchasing supplies, payments to suppliers.

Transactions that affect assets.
Cash in: Selling land, buildings, plants, equipment or intangibles.
Cash out: Purchasing land, buildings, plants, equipment and intangibles.

Activities that affect the owner's equity and long-term creditors.
Cash in: Short-term cash borrowing, owner investments, issuance of notes payable.
Cash out: Owner withdrawals or repayment of cash loans.

• Is distinct from its owner so the proprietorship's financial records do not include the owner's financial records.
• Legally, the proprietor is the business; lenders can go after the owner's personal assets to satisfy the obligations.

Proprietorship

(owner's equity)

Partnership

(legal and financial perspective)

• The partnership is a separate organization, distinct from its partners.
• If the partnership cannot pay its debts, lenders can take the owner's personal assets to satisfy the obligations.

Prepaid expenses

Depreciation

Accrued expenses

Accrued revenues

Unearned revenues

An account that is paired with and follows its related account.

Its normal balance (debit or credit) is the opposite of the balance of the related account.

• If a revenue needs to be credited, then an asset account must be debited (increased) or a liability account must be debited (decreased).
• If an expense needs to be debited, then an asset account must be credited (decreased) or a liability must be credited (increased).

The owner's claims to the assets of the business. These begin when an owner invests assets in the company and receives capital.

Assets MINUS liabilities OR OE + Capital Stock + Retained Earnings.

• Income statement (aka statement of earnings or statement of operations).
• Statement of owner's equity.
• Balance sheet (aka statement of financial position).
• Statement of cash flows.

1. Identify the debit account.
2. Enter transaction date
3. Record the journal page.
4. Record the debit amount.
5. Calculate the new balance.
6. Identify whether the balance is a debit or credit.
7. Record the account # in the "P.R." column.
8. Post the credit to the account.

1. Identify the accounts and their balances.
2. List the accounts and enter their balances (assets, liabilities, owner's equity, revenue, expenses in that order).
3. Add the debit balances.
4. Add the credit balances.
5. Compare the sum of the credits and the debits.

1. Heading (Company Name, Income Statement, Period Ending)
2. List revenues in the 3rd column.
3. List expenses in the 2nd column.
4. Add expenses in the 3rd column.
5. Subtract expenses from revenues and double underline it.

1. Heading (Company Name, Balance Statement/Sheet, date of the balance sheet).
2. List the assets in the 2nd column with only the 1st amount having a $ sign; the last amount is single lined.
3. Total the assets into the 3rd column and double underline.
4. List the liabilities in the 2nd column. The 1st figure has a $ sign. The last figure is single underlined.
5. Total the liabilities into the 3rd column and double underline.
6. List owner's capital in the 3rd column and single underline.
7. Total liabilities and capital into the 3rd column and double underline.

1. Header.
2. Operating activities: Revenues (from AR account) then expenses (from Income Statement).
3. Total operating activities net cash by subtracting outflow from inflow.
4. Investing activities: Sales of assets, then purchase of assets (from the Balance Sheet).
5. Net cash from investing by subtracting purchases from sales.
6. Financing activities: Investments then withdrawals (from Statement of Owner's Equity).
7. Total financing activities by subtracting withdrawals from investments.
8. Total = current cash balance.

9. List Prior cash balance.
10. List current cash balance.

• The amount of asset inflows from the sale of goods or services to customers.
• Typically the sales price or service fee charged to customers.

The amount of assets distributed to owners (stockholders) from current or previous profit.

Earnings Per Share

(EPS)