MGT120 - Financial Accounting I

Introduction to Accounting, Purpose/Relationships of Differing Financial Statements, Ethics What are the Core Accounting Financial Statements? Income Statement: Sometimes known as the statement of profit or loss (P/L). Statement of Retained Earnings: Sometimes included in the statement of changes in owners’ equity. Balance Sheet: Also known as the statement of financial position. Cash Flow Statement: Also known as the statement of cash flows. Statement of Other Comprehensive Income What are Fin

Types of Accounts, T-Accounts, Journals, Ledgers, Trial Balance What is a Transaction? Any event that has a financial impact on a business & can be measured reliably. Describe Common Types of Accounts What is an Account? Each asset, liability & element of shareholders’ equity has its own account, which is used to record all the transactions affecting the related entity. Common Asset Accounts Cash: Consists of bank account balances, paper currency & coins, undeposited cheques. Accounts Receivabl

Accrual vs Cash Basis Accounting, Revenue & Expense Recognition Principles, Adjusting Journal Entries, Closing Journal Entries, Evaluating Debt-Paying Ability Accrual Accounting vs Cash-Basis Accounting What is Cash-Basis Accounting? When using cash-basis accounting, we only record business transactions involving the receipt or payment of cash. All other business transactions are ignored. If a customer purchases a good but does not pay until later, we would not record the sale transactions until

Account for Cash & A/R, Bank Reconciliation, Uncollectible A/R, Note Receivables, Improve Cash Flows, Evaluate Company Liquidity Account for Cash What are Cash Equivalents? Cash equivalents include liquid assets such as treasury bills, commercial paper, money market funds, which are interest-bearing accounts that are very close to maturity (3 months or less at the time of purchase). Slightly less liquid than cash, but similar enough to be reported along with cash. What are Electronic Funds Trans

Perpetual & Periodic Inventory Systems, Inventory Costing Method, Accounting Standards & Inventory, Gross Profit, Inventory Turnover, Inventory Errors What is ‘Costs of Goods Sold’? Cost of Goods Sold (COGS), also known as cost of sales, is the expense of products sold. Basically, how much it cost to make the product. It doesn’t include inventory that hasn’t yet been sold. And only merchandising businesses (companies that sell physical merchandise) have this expense. Perpetual & Periodic Invent

Property, Plant & Equipment; Depreciation; Long-Lived Tangible Assets; Intangible Assets What are Tangible Long-Lived Assets? Tangible long-lived assets, also called property, plant & equipment, do not last forever & must be expensed over their useful lives (depreciation). Land is a unique asset, as it’s not expensed over time because its usefulness never decreases! What are Intangible Assets? Intangible assets are useful because of the special rights they carry. They have no physical form. Thi

Current Liabilities, Contingent Liabilities, Financing with Debt vs. Equity Explain & Account for Current Liabilities What are Current Liabilities? Current liabilities are obligations due within 1 year, or within the company’s normal operating cycle if it’s longer than a year. Obligations due beyond that are long-term or non-current liabilities. 2 Kinds of Current Liabilities Known Amounts Estimated Amounts What are Current Liabilities of Known Amounts? Short-Term Borrowings: Companies sometimes

Corporation, Shares Issuance, Repurchasing Shares, Stock Splits, Fair vs. Book Value, ROA Main Features of a Corporation How Do Corporations Differ From Sole Proprietorships & Partnerships? Separate Legal Entity A corporation is a business entity formed under federal or provincial law, where the government grants articles of incorporation. A corporation is a distinct entity & has many of the same rights as a person. For example, a corporation may buy, own & sell property. Assets & liabilities be

Use of Cash Flow Statement; Operating, Investing & Financing Activities; Indirect Method Uses of the Statement of Cash Flows What Does the Statement of Cash Flows Include? This statement includes details about a company’s cash receipts & cash disbursements from operating, investing & financing activities. It permits a user to determine exactly what caused the company’s cash balance to increase or decrease during the period. What Does the Statement of Cash Flow help Users Do? Predict Future Cash