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Accounting And Financial Statements

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by Tatiana Melniceco, ASEM, February 2010

by Tatiana Melniceco, ASEM, February 2010


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  • 1. ACCOUNTING
  • 2. Accounting:
    • Keeping financial records,recording income and expenditure,valuing assets and liabilities,and so on
  • 3. What are assets?
    • Things that make you money; Assets include current assets like: cash in bank, savings, inventory, prepaid expenses (like insurance), accounts receivable (money owed to you) and fixed assets.
  • 4. What are fixed assets?
    • Fixed assets are the more expensive, usually tangible items that you purchase for your business (like computers, desks, equipment, etc.)
  • 5. What are liabilities?
    • Liabilities are: the bills that you owe, any loans and credit cards for your business.
  • 6. Historical cost:
    • An accounting principle requiring all financial statement items to be based on original cost.
  • 7. Auditing:
    • Inspection and evaluation of accounts by a second set of accountants
  • 8. What are the three basic financial statements that you need to understand to run your business?
    • The first of these forms is the Balance Sheet. It is a comparison of your assets (things that make you money) on the left, and liabilities (things that you owe) and equity (the net worth of your business).
  • 9. What is an Income Statement?
    • Income statement is a snapshot of your business activity at a current point in time
  • 10. What is the cash flow statement?
    • The cash flow statement is the third financial form that you should prepare on a regular basis, at least weekly.
  • 11. A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.
  • 12. The balance sheet must follow the following formula: Assets = Liabilities + Shareholders' Equity