Written contract signed Interest charged Large amount Long time Examples Car loan Home loanĢ2 Owners’ Equity Owners’ equity represents the owner’s claims to the assets of the business. No contract signed No interest charged Small amount Short time “On account” or “on credit”Īccounts receivable Right to receive cash For services rendered or goods delivered Accounts payable Obligation to pay cash For services or goods received Watch out!Ģ1 NOTES PAYABLE Promise to pay supplier or lender Examples LIABILITIES Obligation to do something in future Usually Paid In Cash Can Be Paid With Goods Or Servicesġ8 LIABILITIES Accounts Payable Notes Payable Wages Payable Taxes Payableġ9 ACCOUNTS PAYABLE Promise to pay supplier “On account” or “on credit” Going-Concern Assumption Stable-Dollar Assumption Objectivity Principleġ3 Owned By Business Provide Future Benefits Help Earn Revenue In FutureĪSSETS Owned By Business Provide Future Benefits Help Earn Revenue In Future Must Be “Owned” Not Rentedġ4 ASSETS Cash Supplies Merchandise Land Furnitureġ5 ACCOUNTS RECEIVABLE Money owed our businessīy customers From sales made on credit Customers have received goods or services and promised to pay later “On account” or “on credit”ġ6 Liabilities Liabilities are financial obligations that represent negative future cash flows for the enterprise. These accounting principles support cost as the basis for asset valuation. Vagabond Travel Agencyġ0 A Starting Point: Statement of Financial Positionġ1 Assets Assets are economic resources that are owned by the business and are expected to provide positive future cash flows.ġ2 Assets Cost Principle Going-Concern Stable-Dollar Assumption Income Statement Balance Sheet Statement of Cash Flows Depicts the ways cash has changed during a designated period of time.Ī business entity is separate from the personal affairs of its owner. Income Statement Balance Sheet Statement of Cash Flows Net income (or net loss) is simply the difference between revenues and expenses. Income Statement Balance Sheet Statement of Cash Flows Depicts the revenue and expenses for a designated period of time. Income Statement Balance Sheet Statement of Cash Flows Describes where the enterprise stands at a specific date. We will use a corporation to describe these statements. 2000 XĪlso called Statement of Financial Position Income Statement Balance Sheet Statement of Cash Flows Three primary financial statements. Companies prepare interim financial statements and annual financial statements.
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