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To be successful in this course it is important to be able to classify accounts and knowing which financial statement they belong. The following accounts were shown on page 1-2 and page 1-5 of the VLN. Select the proper account classification and financial statement on which it belongs. Cash Asset, Balance sheet Buildings Salaries Payable [Choose ] Asset, Income statement Liability, Balance sheet Expense, Balance sheet Stockholders' Equity, Balance sheet Stockholders' Equity, Income statement Revenue, Balance sheet Revenue, Income statement Expense, Income statement Liability, Income statement Asset, Balance sheet Equipment Service revenue [Choose] Common stock [Choose ] Salaries expense [Choose] Retained earnings [ Choose] Rent expense [ Choose ] > Styles Chapter 1 Video Lecture Outline Accounting Information and Decision Making Financial statements summarize business activities. PART A: Accounting as a Measurement/Communication Process Financial Statement Heading NAME OF ENTITY who uses Accounting Information? Investor, creditor, customer supplies.competitor NAME OF FINANCIAL STATEMENT DATE OF FINANCIAL STATEMENT AND PERIOD IT COVERS UNIT OF MEASURE Purpose of Accounting: measure the activities of a company and communicate it to others. The Income Statement (IS) BUSINESS ACTIVITIES TO MEASURE Financing -creditors Owners Example of a heading for an income statement A, Inc. Income Statement For the Year Ended June 30, 20XB lin thousands of dollars) "Period Ending' ELEMENTS OF THE INCOME STATEMENT Investing Long term Assets For example landscape like lawn mower, a truck with a trailer Equipment or building or land on long term assets Operating Primary operations of the company Revenue Expenses Revenues (R) Sales Service revenue Forms of Business Organizations -Sole proprietorship = is one owner Partnerships Corporations = is a stock owner Expenses (E) Salaries expense Rent expense Net Income (NI) The income statement equation is: (Revenue - Expenses = Net Income or Net Loss).R-E=NI COMMUNICATING THROUGH FINANCIAL STATEMENTS The Financial Statements 1. Income statement (IS) 2. Statement of Stockholders' Equity (SSE) Practice Rent expense Wage expense Painting supplies expense Painting revenue Supplies used Insurance expense Revenue - expensens $4,500 2,650 1,950 12,000 200 700 3. Balance sheet (BS) 4. Statement of Cash Flows (SCF) Accessibility: Investigate The Balance Sheet (BS) (aka, The statement of Financial Position) Example of a heading for a balance sheet A Inc Balance Sheet At June 30, 20XB lia thousands of dollars) " DEMENTS OF THE BALANCE SHEET Assets (A) -Owned by the company as a result of past transactions. -Economic resources expected to provide future benefits to the company Sergies ces Equipment Buildings Owed by the company as a result of past transactions. Sredamson economic resources (either assets or services) of the company. Sample Hors ozrable, Salariss payable Soddiders Equity (59) Sorroides Eouing results from two basic categories. Common Socks recoined Earnings (PE) THE ACCOUNTING EQUATION (Balance Sheet Equation) A = L + SE Z CS + RE Assets=Labilities - Stockholders' Equity Economic ressurces = Sources of financing What you have, where it came from or A-L=SE Nelas = Owners equity or Owners' daim to resources