This document discusses key accounting concepts including the accounting equation, financial statements, and financial ratios. It explains that the accounting equation is assets = liabilities + owner's equity, and that the four basic financial statements are the income statement, statement of owner's equity, classified balance sheet, and statement of cash flows. It also introduces the concept of using financial ratios to analyze trends in a business's total assets, liabilities, revenues, and expenses over time.

2. Potential usefulness
Future usefulness
Economic Value
Going-concern concept
Objectivity principle
Stable dollar concept

3. climes against the total assets of an
organization
Claims of no owners
Owner's Equity
Claims of owners

4. Cumulative total of net income, net loss, and
dividends since start of business

5. Inflows of assets that result from performing
services or selling goods
the service is performed or
the goods are delivered

6. Outflows of assets or incurrence of liabilities
while earning revenues
A business incurs expenses to earn revenues

7. Things of Value = Claims
Assets = Equities
Assets = Liabilities + Owner's Equity
Assets - Liabilities = Net Assets

8. Use accounting equation
Is there a change in assets?
How much was the change?
Is there another change in assets?
Is there a change in liabilities?
How much was the change?
Is there another change in liabilities?
Is there a change in owners’ equity?
How much was the change?

10. 1)
2)
3)
4)
Income Statement
Statement of Owners’ Equity
Classified Balance Sheet
Statement of Cash Flows

11. Reports changes in owners’ equity from operating
activities

12. Changes in owners’ interest in assets
Issuances of new stock
Net income or loss
Dividends

13. Classification - arrangement of financial
statement items into groupings that have
common basis
Current
Property, plant, and equipment

14. Current
Long-tern
Common stock
Retained earnings

15. Reports cash flows during period
Operating activities
Investing activities
Financing activities

17. Are total assets higher or lower?
What is percent change in total assets?
Is the percent of total liabilities to total liabilities
plus owner’s equity increasing or decreasing?

18. Are revenues higher or lower?
What is the percentage change in total revenues?
Is the percentage of total expenses to total
revenues increasing or decreasing?

19. Is the business operating efficiently by using the least
amount of asset investment to generate a given level
of total revenues?
Total revenues
divided by
Average total assets