Learning Outcomes By the end of this section, you will be able to: What Is Equity? Recall that the accounting equation can help us see what is owned (assets), who is owed (liabilities), and finally who the owners are (equity).…
Learning Outcomes By the end of this section, you will be able to: Net Income and Retained Earnings As mentioned earlier, the financial statements are linked by certain elements and thus must be prepared in a certain order. The income…
Learning Outcomes By the end of this section, you will be able to: The Accounting Equation and the Classified Balance Sheet Recall that the income statement shows the performance of a firm over the course of time. The classified balance…
Learning Outcomes By the end of this section, you will be able to: Financial information flows from one financial statement to the next. Thus, the statements are prepared in a specific order. The first statement prepared is the income statement.…
Figure 5.1 Financial statements are needed to understand a firm’s financial position and performance. (credit: modification of work “Drowning by Numbers” by Jorge Franganillo/flickr, CC BY 2.0) Chapter Outline 5.1 The Income Statement 5.2 The Balance Sheet 5.3 The Relationship between the Balance Sheet and…
Cash versus Accrual Accounting Cash-basis accounting records revenues and expenses only when cash is received or distributed. Accrual-basis accounting, on the other hand, records revenues and expenses when they are earned or incurred rather than waiting until cash changes hands.…
Learning Outcomes By the end of this section, you will be able to: It’s a common misconception that if a business has cash they are making a profit, and if they are suffering a loss they must not have any…
Learning Outcomes By the end of this section, you will be able to: Assets are items a business owns. For accounting purposes, assets are categorized as current versus long term and tangible versus intangible. Any asset that is expected to…
Learning Outcomes By the end of this section, you will be able to: You’ve learned the basics of each method as well as the accounting equation and double-entry accounting. Next, let’s turn our attention to when we record transactions, as…
Learning Outcomes By the end of this section, you will be able to: How and when we record our transactions can have a significant impact on financial statements, especially the income statement (net income). In this section you will explore the…