MGT 8803 Financial Accounting (2023/2024) Already Graded A

MGT 8803 Financial Accounting (2023/2024) Already Graded A Proprietorship Single Owner; unlimited liability & no taxation Partnership More than one owner; unlimited liability & no taxation Corporation A business owned by stockholders (shareholders - board of directors -- top managers); limited liability & taxation Publicly traded or privately held Assumptions of Financial Accounting Separate entity, unit of measurement, going concern, periodicity, materiality Going Concern Presume that the company will continue to operate & that it will be ongoing Periodicity Presume that we can arbitrarily pick any time period that we want to and report the financial results for that time period Materiality only information that would influence the decisions of a reasonable person need be disclosed Users of Financial Reports Investors (Stockholders), Creditors (Banks), Government agencies (SEC), Company management, financial analysts GAAP Generally Accepted Accounting Principles. The standards and rules that accountants follow while recording and reporting financial activities. SEC Securities and Exchange Commission; rule making resides under their authority IFRS International Financial Reporting Standards GAAP vs Tax accounting tax accounting is done for the IRS Qualities of Financial Statements Understandability, timeliness, full disclosure, comparability, objectivity, decision relevance Balance sheet measures financial position at a point in time; Assets = Liabilities + Owners Equity Accounting equation Assets = Liabilities + Owner's Equity Assets Resources of the company; resources owned or rights to receive resources Liabilities Sources of funding provided by the creditors; creditors claims Owners' Equity sources provided by the owners; owner's claims Liquidity the closer they are to being cash, the more liquid they are Cost Principle Assets are valued at their historical cost Current vs Long Term Assets conversion to cash within 1 year Current vs Long Term Liabilities due date within 1 year Capital Stock what the company received when selling shares of stock Retained Earning beg RE + NI - Dividends Dividends distribution of earnings, and only occurs when the Board of Directors decides to distribute the earnings Statement of Stockholders' Equity Beg SE + NI - dividends + Issurance of Capital Stock Cash Basis Accounting revenues will be recognized when cash is received, and expenses are recognized when cash is paid out Income Statement Uses Accrual Accounting; Shows the results of a company's operations (success) over a period of time Revenue Recognition Principle Revenue is recognized when earned; earning process is considered to be complete even though cash has not yet been collected Matching Principle Costs are reported as expenses in the same time period as their related revenues Net Income revenues - expenses Gross Margin Net Sales - COGS Operating Income Gross Margin - Operating Expenses EPS