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Module 2

Module 2. Accounting and Financial Statements. Objectives. What is Accounting?. Forms of Organization. Sole Proprietorship. Partnership. Corporation. Non-Business Organizations. Users of Accounting Information. Accounting and Technology. Communicating Through Financial Statements.

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Module 2

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  1. Module 2 Accounting and Financial Statements

  2. Objectives

  3. What is Accounting?

  4. Forms of Organization

  5. Sole Proprietorship

  6. Partnership

  7. Corporation

  8. Non-Business Organizations

  9. Users of Accounting Information

  10. Accounting and Technology

  11. Communicating Through Financial Statements

  12. Income Statement

  13. Income Statement Inflows of assets in exchange for products andservices provided tocustomers.

  14. Income Statement Costs incurred or the usingup of assetsfrom generating revenue

  15. Income Statement Total revenues less total expenses results in Net Income or Net Loss

  16. Statement of Owner’s Equity

  17. Statement of Owner’s Equity Covers a period of time. From the Income statement.

  18. Balance Sheet

  19. Balance Sheet Properties or economic resources owned by a business

  20. Balance Sheet Debts or Obligations of the business

  21. Balance Sheet Owner’s claim on the assets of a business From the Statement Of Owner’s Equity

  22. Cash Flow Statement

  23. Cash Flow Statement Cash Flow Statement From the balance sheet

  24. Generally Accepted Accounting Principles (GAAP)

  25. Business Entity Principle

  26. Cost Principle

  27. Objectivity Principle

  28. Going-Concern Principle

  29. Monetary Unit Principle

  30. Revenue RecognitionPrinciple

  31. = + Assets Liabilities Equity The Accounting Equation

  32. Transactions

  33. Transaction 1 • John Rich invests $9,500 cash in the business. • Cash increases by $9,500. Owner’s capital increases by $9,500.

  34. Transaction 2 • Purchased supplies for $3,000 cash. • Supplies increase by $3,000. Cash decreases by $3,000.

  35. Transaction 3 • Purchased $7,050 of Furniture and $1,400 of supplies on credit. (A/P for supplies and Notes Payable for the furniture.) • Supplies increase by $1,400. Furniture increases by $7,050. Accounts Payable increases by $1,400. Notes payable increases by $7,050.

  36. Transaction 4 • Services rendered for $2,700 cash. • Cash increases $2,700. • Owner’s equity increases $2,700.

  37. Transaction 5 • Payment of $1,200 rent expense in cash. • Cash decreases $1,200. • Owner’s equity decreases $1,200.

  38. Transaction 6 • Payment of $900 salaries expense in cash. • Cash decreases $900. • Owner’s equity decreases $900.

  39. Transaction 7 • Service contract signed for February and March. • No economic exchange has taken place. • All accounts remain unaffected.

  40. Transaction 8 • Services revenue of $1,700 and rental revenues of $300 rendered for credit. • Accounts receivable increases $2,000. • Owner’s capital increases $2,000.

  41. Transaction 9 • Receipt of $2,000 cash on account. • Cash increases $2,000. • Accounts receivable decreases $2,000.

  42. Transaction 10 • Payment of $450 accounts payable. • Cash decreases $450. • Accounts payable decreases $450.

  43. Transaction 11 • Withdrawal of $1,200 cash by owner. • Cash decreases $1,200. • Owner’s capital decreases $1,200.

  44. Financial Statements

  45. Income Statement

  46. Statement of Owner’s Equity

  47. Balance Sheet

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