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Accounting presentation
- 2. Accounting The accounting equation The users of accounting information The financial statements
- 3. Accounting Equation Assets = Liabilities + Shareholders Equity Assets The economic resources that are owned by the company. A resource is considered an asset when it brings economic benefits to the company. Examples: Cash, Accounts Receivable, Inventory, Supplies, Prepaid Expenses, Land, Equipment, Building, and Accumulated Depreciation.
- 4. Accounting Equation Assets = Liabilities + Shareholders Equity Liabilities The liabilities are the debts and obligations of the company. The three things a company may owe are cash, services, and products. Examples: Accounts Payable, Notes Payable, Salaries Payable, and Unearned Revenues.
- 5. Accounting Equation Assets = Liabilities + Shareholders Equity Shareholders Equity Shareholders Equity is ownership’s claim to the assets. Shareholders Equity is comprised of two accounts Common Stock and Retained Earnings. Common Stock is the amount of stock that has been sold by the company to shareholders. Retained Earnings is comprised of the total revenues, minus the expenses, and dividends of the company since its inception.
- 6. Users and Uses Of Accounting Internal users External users
- 7. Internal Users Company managers uses the company’s financial data to make decisions about various issues: Will the company be able to pay their debt? Is the company receiving payments on time? How much does it cost for each unit produced? Is the company making budget? Will the company be able to give their employees raises?
- 8. External Users Investors, creditors, and other external users use the company’s financial data to make decisions about various issues: Is the company operating efficiently? Where does the company rank based against their competitors? Is the company able to continue paying their debt? Is the company able to continue making dividends?
- 9. Elements and Principles Of Financial Statement Income Statement Statement of Retained Earnings Balance Sheet Statement of Cash Flows Image received from: Creativecommons.org
- 10. Income Statement For a certain time frame it summarizes how well the company is performing. Revenues and expenses are summarized for a time frame such as a month or year. When revenues are greater than expenses a company records a net income. When revenues are less than expenses the company records a net loss.
- 11. Statement of Retained Earnings Specifies the total amount the owners have invested, distributed in dividends, and the either the net income or net loss of a company. Specifies the fluctuations in retained earnings for the time period the financial statement covers.
- 12. Balance Sheet A financial statement that summarizes a company’s assets, liabilities, and shareholders equity. Assets must equal liabilities plus shareholders equity to correctly balance.
- 13. Statement of Cash Flows Summarizes how cash and cash equivalents are effecting the company’s operations for a certain time frame. Displays cash fluctuating from activities such as investing and financing. Allows investors to understand how a company is operating.