Unit 1 Introduction to Financial Accounting Learning Outcome After reading this unit, you will be able to: • Explain succinctly financial accounting concepts • Elucidate on different principles of financial accounting • Explicate the importance and scope of financial accounting • Understand Generally Accepted Accounting Principles(GAAP) • Identify limitations of Financial Accounting Time Required to Complete the unit 1. 2. 1st Reading: It will need 3 Hrs for reading a unit 2nd Reading
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four basic financial statements are a balance sheet, an income statement, a retained earnings statement and a statement of cash flows. All of the financial statements complement each other and work together. The balance sheet describes what a company owns and what it owes at a specific time. In this statement assets or what is owned by the company must balance with the claims to the assets. Internal users like managers and employees use a balance sheet to see the stockholders’ equity. The
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paid – the Debtor of £60 – is included in the Balance Sheet. (Transaction 4) Less Cost of Goods Sold (175) This is the cost to you of the 350 bottles that you have sold during Monday. You bought them for £0.50 each. This is not the cost of all of the 500 bottles that you bought. The remaining 150 bottles that remain unsold at the end of Monday are included in the Balance Sheet as Inventory (£75) as you expect to sell them on
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are "cash in" (deposits to the bank account) called cash receipts, and "cash out" (checks) called cash disbursements. Cash receipts - Cash disbursement = Cash flow. Each month's cash flow is added to the preceding month's cash balance yielding the current month’s cash balance. The cash basis of accounting is more likely to be used by service businesses than by retail or manufacturing businesses. Service businesses usually do not need equipment and can sell a service they perform with nothing more
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is considering dropping his accounting class because he cannot understand the rules of debits and credits. Explain the rules of debits and credits in a way that will help him understand them. Cite examples for each of the major sections of the balance sheet (assets, liabilities and stockholders' equity) and the income statement (revenues and expenses). | | | Student Answer: | | Debits and Credits are pretty simple. Everyone knows the famous saying " what goes up most come down." It's the
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Doubts: 8. Which of the following statements are true regarding the balance sheet? 1. One cannot determine the true fair market value of a company by reviewing its balance sheet. 2. Certain internally generated assets, such as a trademark, are not reported on a company's balance sheet. 3. A balance sheet shows only the ending balances, in a summarized format, of all balance sheet accounts in the accounting system as of a particular date. a. None are true. b. Statements
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Fundamental Accounting Equation? Assets=Liabilities + Owners Equity 4. What is the purpose of a balance sheet? What are some examples of typical balance sheet accounts? A balance sheet is the summarization of the financial position at a given point in time, usually at the end of the month, quarter or end of the fiscal year. Any publicly traded corporation will have a balance sheet that is available to their investors. Example: Google, Microsoft, AT&T, etc. 5. What is the
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Observation Station, three balance sheets each from the U.S. and Europe’s railroad companies chosen from a list on the menu are to be compared and observed (IFRS vs. GAAP). Are IFRS balance sheets classifications the same as GAAP balance sheets, and which one is better? Are the IFRS balance sheets the same with one another, and what does IAS 1 require for a presentation format of balance sheets? It should also be determined if there should be one format for balance sheets required for all companies
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Music Mart, Inc. On a sheet of paper, set up in pencil the balance sheet of Music Mart, lnc., as it appears after the last transaction described in the text (January 4), leaving considerable space between each item. Record the effect, if any, of the following events on the balance sheet, either by revising existing figures (cross out, rather than erase) or by adding new items as necessary. At least one of these events does not affect the balance sheet. The basic equation, Assets=Liabilities + Owners’
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and also Shareholder Equity = Assets – Liabilities. The common theme is balance, no matter how the accounting equation is written it must reflect the total number of company assets are equal to the total number of liabilities the company has and those numbers are equal to shareholder equity and balance on the balance sheet. Though simply put, the accounting equation is a complex network of data displayed on the balance sheet and any transaction can offset the equation. On the same token a sale or
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