This document provides an introduction to accounting and business concepts. It defines the three main types of businesses as manufacturing, merchandising, and service. It also describes the three forms of business organization - proprietorship, partnership, and corporation. Key accounting concepts like the accounting equation, financial statements, and ratio analysis are introduced. Transactions for a sample proprietorship are presented to demonstrate how business activities are recorded and reported using financial statements.
This chapter introduces accounting and its role in business. It defines the three main types of business organizations - proprietorship, partnership, and corporation. It explains the accounting equation and how business transactions affect the basic elements of assets, liabilities, and owner's equity. Financial statements like the income statement, balance sheet, and statement of cash flows are introduced as tools to provide information to stakeholders about the business's performance and financial position.
1. The document discusses accounting concepts such as accounts, debits and credits, T-accounts, and the double-entry accounting system.
2. It explains how transactions are recorded in journals and posted to ledger accounts using debits and credits to satisfy the double-entry principle.
3. Examples of accounting entries are provided to illustrate how specific transactions affect asset, liability, equity, revenue and expense accounts.
Principal accounting - Ch02 analyzing transactionArfan Fahmi
The document provides objectives and content for analyzing transactions in accounting. It discusses accounts and their characteristics, debit and credit rules, analyzing transaction effects on financial statements, preparing trial balances, and discovering and correcting errors. It also covers horizontal analysis to compare financial statements over different periods.
This chapter provides an overview of accounting. It defines accounting as a service activity that presents quantitative financial information about an economic entity to support economic decision making. It discusses the users of accounting information, the divisions of accounting, types of businesses, the accounting equation, and basic accounting concepts. It also provides examples of business transactions and the corresponding journal entries. Finally, it discusses the key financial statements - the income statement, statement of owner's equity, balance sheet, statement of cash flows, and notes - and how they are prepared from the accounting records and used for financial analysis.
1. The document discusses key accounting concepts like the accounting equation, double-entry recording, T-accounts, debit and credit rules for different types of accounts.
2. It provides examples of recording business transactions like starting a business, purchases, expenses, revenues using T-accounts and following the double-entry system.
3. Special accounts like returns inwards, returns outwards are discussed which are used to record returns of goods from customers or suppliers.
This document provides an overview of accounting concepts including the nature of business, accounting principles, assets, liabilities, equity, business transactions, and financial statements. It covers 9 learning objectives and includes sample accounting entries for various business transactions involving cash, supplies, fees earned, expenses paid, and owner withdrawals. The power notes section allows the user to select different accounting topics for more information.
This chapter introduces accounting and its role in business. It defines the three main types of business organizations - proprietorship, partnership, and corporation. It explains the accounting equation and how business transactions affect the basic elements of assets, liabilities, and owner's equity. Financial statements like the income statement, balance sheet, and statement of cash flows are introduced as tools to provide information to stakeholders about the business's performance and financial position.
1. The document discusses accounting concepts such as accounts, debits and credits, T-accounts, and the double-entry accounting system.
2. It explains how transactions are recorded in journals and posted to ledger accounts using debits and credits to satisfy the double-entry principle.
3. Examples of accounting entries are provided to illustrate how specific transactions affect asset, liability, equity, revenue and expense accounts.
Principal accounting - Ch02 analyzing transactionArfan Fahmi
The document provides objectives and content for analyzing transactions in accounting. It discusses accounts and their characteristics, debit and credit rules, analyzing transaction effects on financial statements, preparing trial balances, and discovering and correcting errors. It also covers horizontal analysis to compare financial statements over different periods.
This chapter provides an overview of accounting. It defines accounting as a service activity that presents quantitative financial information about an economic entity to support economic decision making. It discusses the users of accounting information, the divisions of accounting, types of businesses, the accounting equation, and basic accounting concepts. It also provides examples of business transactions and the corresponding journal entries. Finally, it discusses the key financial statements - the income statement, statement of owner's equity, balance sheet, statement of cash flows, and notes - and how they are prepared from the accounting records and used for financial analysis.
1. The document discusses key accounting concepts like the accounting equation, double-entry recording, T-accounts, debit and credit rules for different types of accounts.
2. It provides examples of recording business transactions like starting a business, purchases, expenses, revenues using T-accounts and following the double-entry system.
3. Special accounts like returns inwards, returns outwards are discussed which are used to record returns of goods from customers or suppliers.
This document provides an overview of accounting concepts including the nature of business, accounting principles, assets, liabilities, equity, business transactions, and financial statements. It covers 9 learning objectives and includes sample accounting entries for various business transactions involving cash, supplies, fees earned, expenses paid, and owner withdrawals. The power notes section allows the user to select different accounting topics for more information.
This document provides an overview of key accounting concepts and principles including:
- Accounting measures and communicates financial information as the language of business. It has internal and external users.
- There are three main fields: management, financial, and public sector accounting. Standards are set by groups like FASB, SEC, and AICPA.
- Business organizations can be proprietorships, partnerships, or corporations, each with advantages and disadvantages.
- Key concepts include the accounting equation, GAAP, revenues/expenses, and preparing financial statements like the income statement, balance sheet, and statement of cash flows to evaluate business performance.
1. Accounting provides financial information to internal and external users to help them make decisions. It involves recording, classifying, measuring, and communicating financial data.
2. The basic accounting equation is Assets = Liabilities + Owner's Equity. It shows the resources owned (assets), claims against assets (liabilities), and ownership interest (owner's equity) of a business.
3. Transactions affect the basic accounting equation by increasing or decreasing at least one item on each side of the equation.
Lecture_1_Accounting_ Elements & Accounting_Procedure.pptSkMumtahina1
1. The accounting process involves identifying economic events, recording them in the accounting system, and preparing and communicating financial reports to both internal and external users.
2. The basic accounting equation states that assets must equal liabilities plus owner's equity. This equation must remain in balance at all times.
3. The double-entry system of accounting requires equal debit and credit entries to be made for every transaction to keep the accounting equation in balance.
400 25,000 7,500 –2,125
Bal. 400 25,000 7,500 –2,125 –800 –450 –275
g.
Bal. 400 25,000 7,500 –2,125 –800 –450 –275
1-37
5
Describe the financial
statements of a corporation
and explain how they
interrelate.
1-38
5
Financial Statements
- Balance Sheet
- Income Statement
- Statement of Retained Earnings
- Statement of Cash Flows
These statements provide information about a
company's performance and financial position.
They interrelate by presenting a
The document discusses key concepts in the accounting information system including:
1) The basic steps in the recording process such as analyzing transactions, journalizing, posting to ledger accounts, and preparing a trial balance.
2) The use of debits and credits to record transactions and their effect on different types of accounts.
3) The purpose and use of accounts, journals, ledgers, and the trial balance in the recording process.
Introduction to Financial statements - AccountingFaHaD .H. NooR
Financial statement introduction and its elements.
There are three fundamental financial statements used in accounting.
The income statement shows revenues and expenses.
The balance sheet is a listing of all asset, liability, and equity account balances that do not appear on the income statement.
The statement of cash flows shows how the company receives and spends its cash.
1) The document provides an overview of accounting principles and the accounting process. It discusses the basic accounting equation, transactions, debits and credits, and the key financial statements.
2) Sample transactions are presented for a new business that purchases equipment, supplies, earns revenue, and pays expenses. Journal entries are provided to record each transaction.
3) Accounting is defined as a system that identifies, records, and communicates financial information about an entity. The accounting process includes recording economic events, classifying data, preparing financial statements, and analyzing and communicating results.
1) The document provides an overview of accounting principles and the accounting process. It discusses the basic accounting equation, transactions, debits and credits, and the key financial statements.
2) Sample transactions are presented for a new business that purchases equipment, supplies, earns revenue, and pays expenses. Journal entries are provided to record each transaction.
3) Accounting is defined as a system for identifying, recording, and communicating financial information about an economic entity. It involves recording economic events, classifying and summarizing data, and preparing financial reports.
1. The document provides an overview of accounting principles and the accounting process. It discusses the basic accounting equation, assets, liabilities, and owner's equity as building blocks of accounting.
2. Sample transactions are presented for a new business called Softbyte to demonstrate how accounting records economic events and their impact on the basic accounting equation.
3. The accounting process includes identifying business transactions, recording the financial effects of the transactions, and preparing accounting reports to analyze the entity's performance and financial position.
1) The document provides an overview of accounting principles and the accounting process. It discusses the basic accounting equation, transactions, debits and credits, and the key financial statements.
2) Sample transactions are presented for a new business that purchases equipment, supplies, earns revenue, and pays expenses. Journal entries are provided to record each transaction.
3) Accounting is defined as a system that identifies, records, and communicates financial information about an entity. The accounting process includes recording economic events, classifying data, preparing financial statements, and analyzing and communicating results.
1. The document discusses accounting concepts including the accounting equation, assets, liabilities, and owner's equity.
2. It provides an example of analyzing the effects of business transactions on the accounting equation for a repair shop owner.
3. Each transaction has a dual effect that maintains the balance of the accounting equation by increasing or decreasing at least two items.
CH01 Introduction to Finance and Accounting.ppthassanakhar
1) The document provides an overview of accounting and finance concepts including the accounting process, generally accepted accounting principles, the basic accounting equation, and transaction analysis.
2) It explains that accounting involves recording, classifying, and summarizing economic events, and communicating this information through financial reports, while finance is the broader term referring to asset and liability management and planning for growth.
3) Several examples of accounting transactions are analyzed to demonstrate the application of the basic accounting equation and how accounting records increases and decreases in assets, liabilities, and owner's equity.
The document provides an overview of the accounting cycle and key concepts in financial accounting. It discusses [1] what accounts are and how they are used to record business transactions, [2] the basic steps in the recording process including journalizing, posting to ledgers, and preparing a trial balance, and [3] key adjusting entries related to deferrals like prepaid expenses and unearned revenues, and accruals like accrued revenues and accrued expenses. The purpose is to explain the fundamentals of recording and reporting financial information according to generally accepted accounting principles.
The document provides information about accounting, including definitions, key concepts, branches of accounting, and accounting transactions. It defines accounting as recording, summarizing, reporting and examining financial transactions. It outlines the main branches of accounting as financial, cost, management, fiduciary, fund, government, tax, and auditing accounting. It also includes sample accounting transactions, ledger accounts, and final accounts such as trading account, profit and loss account, and balance sheet.
There are three main types of business organizations: proprietorships, partnerships, and corporations. Proprietorships are owned by one individual and have limited financial resources but unlimited liability. Partnerships are owned by two or more individuals, have more financial resources than proprietorships but also have unlimited liability. Corporations are separate legal entities that can issue stock to obtain large amounts of capital but are subject to double taxation. Accounting provides financial information to both internal and external stakeholders through financial statements such as the income statement, retained earnings statement, and balance sheet.
The document is a chapter from an accounting textbook that discusses analyzing transactions and the basics of double-entry accounting. It introduces accounts, the rules of debit and credit, and how transactions are recorded in journals and T-accounts to update the balances of asset, liability, equity, revenue and expense accounts. It provides examples of common transactions recorded, such as cash deposits and withdrawals, purchases, expenses and revenue. The overall purpose is to teach students the fundamental principles and mechanics of double-entry accounting.
Accounting Cycle - Ledgers - Capturing accounting eventFaHaD .H. NooR
What is a general ledger account?
A general ledger account is an account or record used to sort and store balance sheet and income statement transactions. Examples of general ledger accounts include the asset accounts such as Cash, Accounts Receivable, Inventory, Investments, Land, and Equipment. Examples of the general ledger liability accounts include Notes Payable, Accounts Payable, Accrued Expenses Payable, and Customer Deposits. Examples of income statement accounts found in the general ledger include Sales, Service Fee Revenues, Salaries Expense, Rent Expense, Advertising Expense, Interest Expense, and Loss on Disposal of Assets.
Some general ledger accounts are summary records which are referred to as control accounts. The detail that supports each of the control accounts will be found outside of the general ledger in what is known as a subsidiary ledger. For example, Accounts Receivable could be a control account in the general ledger, and there will be a subsidiary ledger which contains each customer's credit activity. The general ledger accounts Inventory, Equipment, and Accounts Payable could also be control accounts and for each there will be a subsidiary ledger containing the supporting detail.
NetSolutions records business transactions using double-entry accounting. Transactions include Chris Clark investing $25,000 cash in the business, purchasing $20,000 of land, buying $1,350 of supplies on account, earning $7,500 in fees, paying $3,650 in expenses, paying $950 to creditors, using $800 of supplies, and Chris Clark withdrawing $2,000 cash. Debits and credits are equal for each transaction to maintain the accounting equation of assets = liabilities + owner's equity.
This document provides an overview of key accounting concepts and principles including:
- Accounting measures and communicates financial information as the language of business. It has internal and external users.
- There are three main fields: management, financial, and public sector accounting. Standards are set by groups like FASB, SEC, and AICPA.
- Business organizations can be proprietorships, partnerships, or corporations, each with advantages and disadvantages.
- Key concepts include the accounting equation, GAAP, revenues/expenses, and preparing financial statements like the income statement, balance sheet, and statement of cash flows to evaluate business performance.
1. Accounting provides financial information to internal and external users to help them make decisions. It involves recording, classifying, measuring, and communicating financial data.
2. The basic accounting equation is Assets = Liabilities + Owner's Equity. It shows the resources owned (assets), claims against assets (liabilities), and ownership interest (owner's equity) of a business.
3. Transactions affect the basic accounting equation by increasing or decreasing at least one item on each side of the equation.
Lecture_1_Accounting_ Elements & Accounting_Procedure.pptSkMumtahina1
1. The accounting process involves identifying economic events, recording them in the accounting system, and preparing and communicating financial reports to both internal and external users.
2. The basic accounting equation states that assets must equal liabilities plus owner's equity. This equation must remain in balance at all times.
3. The double-entry system of accounting requires equal debit and credit entries to be made for every transaction to keep the accounting equation in balance.
400 25,000 7,500 –2,125
Bal. 400 25,000 7,500 –2,125 –800 –450 –275
g.
Bal. 400 25,000 7,500 –2,125 –800 –450 –275
1-37
5
Describe the financial
statements of a corporation
and explain how they
interrelate.
1-38
5
Financial Statements
- Balance Sheet
- Income Statement
- Statement of Retained Earnings
- Statement of Cash Flows
These statements provide information about a
company's performance and financial position.
They interrelate by presenting a
The document discusses key concepts in the accounting information system including:
1) The basic steps in the recording process such as analyzing transactions, journalizing, posting to ledger accounts, and preparing a trial balance.
2) The use of debits and credits to record transactions and their effect on different types of accounts.
3) The purpose and use of accounts, journals, ledgers, and the trial balance in the recording process.
Introduction to Financial statements - AccountingFaHaD .H. NooR
Financial statement introduction and its elements.
There are three fundamental financial statements used in accounting.
The income statement shows revenues and expenses.
The balance sheet is a listing of all asset, liability, and equity account balances that do not appear on the income statement.
The statement of cash flows shows how the company receives and spends its cash.
1) The document provides an overview of accounting principles and the accounting process. It discusses the basic accounting equation, transactions, debits and credits, and the key financial statements.
2) Sample transactions are presented for a new business that purchases equipment, supplies, earns revenue, and pays expenses. Journal entries are provided to record each transaction.
3) Accounting is defined as a system that identifies, records, and communicates financial information about an entity. The accounting process includes recording economic events, classifying data, preparing financial statements, and analyzing and communicating results.
1) The document provides an overview of accounting principles and the accounting process. It discusses the basic accounting equation, transactions, debits and credits, and the key financial statements.
2) Sample transactions are presented for a new business that purchases equipment, supplies, earns revenue, and pays expenses. Journal entries are provided to record each transaction.
3) Accounting is defined as a system for identifying, recording, and communicating financial information about an economic entity. It involves recording economic events, classifying and summarizing data, and preparing financial reports.
1. The document provides an overview of accounting principles and the accounting process. It discusses the basic accounting equation, assets, liabilities, and owner's equity as building blocks of accounting.
2. Sample transactions are presented for a new business called Softbyte to demonstrate how accounting records economic events and their impact on the basic accounting equation.
3. The accounting process includes identifying business transactions, recording the financial effects of the transactions, and preparing accounting reports to analyze the entity's performance and financial position.
1) The document provides an overview of accounting principles and the accounting process. It discusses the basic accounting equation, transactions, debits and credits, and the key financial statements.
2) Sample transactions are presented for a new business that purchases equipment, supplies, earns revenue, and pays expenses. Journal entries are provided to record each transaction.
3) Accounting is defined as a system that identifies, records, and communicates financial information about an entity. The accounting process includes recording economic events, classifying data, preparing financial statements, and analyzing and communicating results.
1. The document discusses accounting concepts including the accounting equation, assets, liabilities, and owner's equity.
2. It provides an example of analyzing the effects of business transactions on the accounting equation for a repair shop owner.
3. Each transaction has a dual effect that maintains the balance of the accounting equation by increasing or decreasing at least two items.
CH01 Introduction to Finance and Accounting.ppthassanakhar
1) The document provides an overview of accounting and finance concepts including the accounting process, generally accepted accounting principles, the basic accounting equation, and transaction analysis.
2) It explains that accounting involves recording, classifying, and summarizing economic events, and communicating this information through financial reports, while finance is the broader term referring to asset and liability management and planning for growth.
3) Several examples of accounting transactions are analyzed to demonstrate the application of the basic accounting equation and how accounting records increases and decreases in assets, liabilities, and owner's equity.
The document provides an overview of the accounting cycle and key concepts in financial accounting. It discusses [1] what accounts are and how they are used to record business transactions, [2] the basic steps in the recording process including journalizing, posting to ledgers, and preparing a trial balance, and [3] key adjusting entries related to deferrals like prepaid expenses and unearned revenues, and accruals like accrued revenues and accrued expenses. The purpose is to explain the fundamentals of recording and reporting financial information according to generally accepted accounting principles.
The document provides information about accounting, including definitions, key concepts, branches of accounting, and accounting transactions. It defines accounting as recording, summarizing, reporting and examining financial transactions. It outlines the main branches of accounting as financial, cost, management, fiduciary, fund, government, tax, and auditing accounting. It also includes sample accounting transactions, ledger accounts, and final accounts such as trading account, profit and loss account, and balance sheet.
There are three main types of business organizations: proprietorships, partnerships, and corporations. Proprietorships are owned by one individual and have limited financial resources but unlimited liability. Partnerships are owned by two or more individuals, have more financial resources than proprietorships but also have unlimited liability. Corporations are separate legal entities that can issue stock to obtain large amounts of capital but are subject to double taxation. Accounting provides financial information to both internal and external stakeholders through financial statements such as the income statement, retained earnings statement, and balance sheet.
The document is a chapter from an accounting textbook that discusses analyzing transactions and the basics of double-entry accounting. It introduces accounts, the rules of debit and credit, and how transactions are recorded in journals and T-accounts to update the balances of asset, liability, equity, revenue and expense accounts. It provides examples of common transactions recorded, such as cash deposits and withdrawals, purchases, expenses and revenue. The overall purpose is to teach students the fundamental principles and mechanics of double-entry accounting.
Accounting Cycle - Ledgers - Capturing accounting eventFaHaD .H. NooR
What is a general ledger account?
A general ledger account is an account or record used to sort and store balance sheet and income statement transactions. Examples of general ledger accounts include the asset accounts such as Cash, Accounts Receivable, Inventory, Investments, Land, and Equipment. Examples of the general ledger liability accounts include Notes Payable, Accounts Payable, Accrued Expenses Payable, and Customer Deposits. Examples of income statement accounts found in the general ledger include Sales, Service Fee Revenues, Salaries Expense, Rent Expense, Advertising Expense, Interest Expense, and Loss on Disposal of Assets.
Some general ledger accounts are summary records which are referred to as control accounts. The detail that supports each of the control accounts will be found outside of the general ledger in what is known as a subsidiary ledger. For example, Accounts Receivable could be a control account in the general ledger, and there will be a subsidiary ledger which contains each customer's credit activity. The general ledger accounts Inventory, Equipment, and Accounts Payable could also be control accounts and for each there will be a subsidiary ledger containing the supporting detail.
NetSolutions records business transactions using double-entry accounting. Transactions include Chris Clark investing $25,000 cash in the business, purchasing $20,000 of land, buying $1,350 of supplies on account, earning $7,500 in fees, paying $3,650 in expenses, paying $950 to creditors, using $800 of supplies, and Chris Clark withdrawing $2,000 cash. Debits and credits are equal for each transaction to maintain the accounting equation of assets = liabilities + owner's equity.
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2. 1. Describe the nature of a business.
2. Describe the role of accounting in business.
3. Describe the importance of business ethics and
the basic principles of proper ethical conduct.
4. Describe the profession of accounting.
5. Summarize the development of accounting
principles and relate them to practice.
6. State the accounting equation and define each
element of the equation.
Objectives
After s
chapter,
3. 7. Explain how business transactions can be
stated in terms of the resulting change in the
basic elements of the accounting equation.
Objectives
8. Describe the financial statements of a
proprietorship and explain how they interrelate.
9. Use the ratio of liabilities to owner’s equity to
analyze the ability of a business to withstand
poor business conditions.
4. Manufacturing Business
Product
General Motors Cars, trucks, vans
Intel Computer chips
Boeing Jet aircraft
Nike Athletic shoes and apparel
Coca-Cola Beverages
Sony Stereos and television
Types of Businesses
5. Merchandising Business
Product
Wal-Mart General merchandise
Toys “R” Us Toys
Circuit City Consumer electronics
Lands’ End Apparel
Amazon.com Internet books, music, video
retailer
Types of Businesses
7. There are three types of
business organizations
✔ Proprietorship
✔ Partnership
✔ Corporation
8. A proprietorship is
owned by one
individual.
Advantages
• Ease in organizing
• Low cost of
organizing
Disadvantage
• Limited source of
financial resources
• Unlimited liability
Joe’s
9. A partnership is
owned by two or
more individuals.
Advantages
• More financial
resources than a
proprietorship.
• Additional
management skills.
Disadvantage
• Unlimited liability.
Joe and Marty’s
10. A corporation is
organized under state or
federal statutes as a
separate legal entity.
Advantage
• The ability to obtain
large amounts of
resources by issuing
stocks.
Disadvantage
• Double taxation.
J & M, Inc.
11. Business Strategies
A business strategy is an integrated
set of plans and actions designed to
enable the business to gain an
advantage over its competitors, and
in doing so, to maximize its profits.
12. Business Strategies
Under a low-cost strategy, a business
designs and produces products or
services of acceptable quality at a cost
lower than that of its competitors.
Wal-Mart
Southwest Airlines
13. Business Strategies
Under a differential strategy, a business
designs and produces products or services
that possess unique attributes or
characteristics which customers are willing
to pay a premium price.
Maytag
Tommy Hilfiger
14. Value Chain of a Business
A value chain is the way a
business adds value for its
customers by processing inputs
into product or service.
Inputs
Business
Processes
Products or
Services
Customer
Value
15. A business stakeholder is a person or
entity having an interest in the
economic performance of the business.
Business Stakeholders
19. Business Ethics
1. Avoid small ethical lapses.
2. Focus on your long-term
reputation.
3. You may expect to suffer
adverse personal
consequences for holding
to an ethical position.
Sound
Principles that
form the
foundation for
ethical
behavior
20. Profession of Accounting
Accountants employed by a business firm or
a not-for-profit organization are said to be
engaged in private accounting.
Accountants and their staff who provide
services on a fee basis are said to be
employed in public accounting.
22. The business entity concept
limits the economic data in
the accounting system to
data related directly to the
activities of the business.
The cost concept is the
basis for entering the
exchange price, or cost
of an acquisition in the
accounting records.
23. The objectivity concept
requires that the accounting
records and reports be based
upon objective evidence.
The unit-of-measure
concept requires that
economic data be
recorded in dollars.
27. What is a business
transaction?
A business transaction is an economic event or
condition that directly changes an entity’s financial
condition or directly affects its results of operations.
28. On November 1,
2005, Chris
Clark begins a
business that will
be known as
NetSolutions.
29. a. Chris Clark deposits $25,000 in a bank
account in the name of NetSolutions.
Chris Clark, Capital
25,000 Investment
by Chris
Clark
Cash
25,000
a.
Assets Owner’s Equity
=
=
30. b. NetSolutions exchanged $20,000 for land.
Chris Clark, Capital
25,000
Cash + Land
25,000
Bal.
Assets Owner’s Equity
=
=
b. –20,000
+20,000
Bal. 5,000 20,000 25,000
31. Accounts Chris Clark,
Cash + Supplies + Land Payable Capital
Assets
c. During the month, NetSolutions purchased
supplies for $1,350 and agreed to pay the
supplier in the near future (on account).
Owner’s
Liabilities + Equity
=
Bal. 5,000 20,000 25,000
c. + 1,350 + 1,350
Bal. 5,000 1,350 20,000 1,350 25,000
=
32. d. NetSolutions provided services to
customers, earning fees of $7,500 and
received the amount in cash.
Bal. 12,500 1,350 20,000 1,350 32,500
d. + 7,500 + 7,500
Accounts Chris Clark,
Cash + Supplies + Land Payable Capital
Assets
Owner’s
Liabilities + Equity
Bal. 5,000 1,350 20,000 1,350 25,000
Fees
earned
=
=
33. e. – 3,650 –2,125
– 800
– 450
– 275
Wages
Rent
Util.
Misc.
Accounts Chris Clark,
Cash + Supplies + Land Payable Capital
Assets
e. NetSolutions paid the following
expenses: wages, $2,125; rent, $800;
utilities, $450; and miscellaneous, $275.
Owner’s
Liabilities + Equity
=
Bal. 12,500 1,350 20,000 1,350 32,500
=
Bal. 8,850 1,350 20,000 1,350 28,850
34. Accounts Chris Clark,
Cash + Supplies + Land Payable Capital
Assets
f. NetSolutions paid $950 to
creditors during the month.
Owner’s
Liabilities + Equity
=
Bal. 8,850 1,350 20,000 1,350 28,850
f. – 950 – 950
=
Bal. 7,900 1,350 20,000 400 28,850
35. Accounts Chris Clark,
Cash + Supplies + Land Payable Capital
Assets
g. At the end of the month, the cost
of supplies on hand is $550, so
$800 of supplies were used.
Owner’s
Liabilities + Equity
=
Bal. 7,900 1,350 20,000 400 28,850
g. – 800 – 800
=
Bal. 7,900 550 20,000 400 28,050
Supplies
expense
36. Accounts Chris Clark,
Cash + Supplies + Land Payable Capital
Assets
h. At the end of the month, Chris
withdrew $2,000 in cash from the
business for personal use.
Owner’s
Liabilities + Equity
Bal. 7,900 550 20,000 400 28,050
h. –2,000 –2,000
Bal. 5,900 550 20,000 400 26,050
With-
drawal
=
=
39. Financial Statements
� Income statement—A summary of the revenue
and expenses for a specific period of time.
� Statement of owner’s equity—A summary of the
changes in the owner’s equity that have
occurred during a specific period of time.
� Balance sheet—A list of the assets, liabilities, and
owner’s equity as of a specific date.
� Statement of cash flows—A summary of the cash
receipts and disbursements for a specific period
of time.
40. Fees earned $7 500 00
Operating expenses:
Rent expense
$2 125 00
Wages expense
800 00
Supplies expense
450 00
Utilities expense
275 00
Miscellaneous expense
Total operating expenses 1 135 00
NetSolutions
Income Statement
For the Month Ended November 30, 2005
800 00
Net income $3 050 00
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41. Chris Clark, capital, November 1, 2005 $ 0
NetSolutions
Statement of Owner’s Equity
For the Month Ended November 30, 2005
Investment on November 1 $25 000 00
Net income for November 3 050 00
$28 050 00
Less withdrawals 2 000 00
Increase in owner’s equity 26 050 00
Chris Clark, capital, November 30, 2005 $26 050 00
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42. Assets Liabilities
NetSolutions
Balance Sheet
November 30, 2005
Cash $ 5 900 00 Accounts Payable $ 400 00
Supplies 550 00 Owner’s Equity
Land 20 000 00 Chris Clark, cap. 26 050 00
Total liabilities and
Total assets $26 450 00 owner’s equity $26 450 00
From the
statement of
owner’s equity
This balance sheet presented
using the account form
43. When the balance sheet displays the
liabilities and owner’s equity below
the assets, the report form is being
used.
44. Cash flows from operating activities:
Cash received from customers $ 7 500 00
Deduct cash payments for expenses
and payments to creditors 4 600 00
Net cash flow from operating activities 2 900 00
Cash flows from investing activities:
Cash payment for acquisition of land (20 000 00
Cash flows from financing activities:
Cash received as owner’s investment $25 000 00
Deduct cash withdrawal by owner 2 000 00
Net cash flow from financing activities 23 000 00
Net cash flow and Nov. 30, 2005 cash bal. $ 5 900 00
NetSolutions
Statement of Cash Flows
For the Month Ended November 30, 2005
Should match Cash on the balance sheet
)
45. Statement of Cash Flows
Cash Flows from Operating Activities—This section
reports a summary of cash receipts and cash payments
from operations.
Cash Flows from Investing Activities—This section
reports the cash transactions for the acquisition and sale
of relatively permanent assets.
Cash Flows from Financing Activities—This section
reports the cash transactions related to cash
investments by the owner, borrowings, and cash
withdrawals by the owner.
46. Ratio of liabilities
to owner’s equity
=
Total Liabilities
Total owner’s equity (or total
stockholders’ equity)
The ratio of liabilities to owner’s equity
allows owners like Chris Clark to analyze
the firm’s ability to withstand poor
business conditions.
Tools for Financial
Analysis and Interpretation
47. Ratio of
liabilities to
owner’s equity
=
$400
$26,050
Tools for Financial
Analysis and Interpretation
= 0.015
Ratio of
liabilities to
owner’s equity