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Full Summary - Financial Accounting 1 for Business (Midterm + Endterm)

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Course
Financial Accounting 1 for Business

Institution
Universiteit Van Amsterdam (UvA)

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Uploaded on August 14, 2023
Number of pages 93
Written in 2023/2024
Type Summary

financial accounting
accounting summary
ratios
examples
graphs

Institution
Universiteit van Amsterdam (UvA)
Education
Business Administration
Course
Financial Accounting 1 for Business

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, ~ Midterm:ALL chapters from ittorial, so likely exam will be like tutorial questions!

WEEK1:
Lecture 1A: accountable for all dept
Unlimited liability means
- theyare

and have to it all back even if it
pay
means their
having to use own money

3 basic activities of accounting: Different types of
organisations:
identification (select Sole Proprietorships:n o privatecompanyonly
economic transaction ( -

clear distinction between
↳1
equity capital equity
=

Recording (Record, classifyandSummarise) ·

unlimited liability and
profits are
private income

Communicating (Prepare accounting reports) Partnerships:
-

more than
-
one owner

↳ I
equity account for each

a
transactions help external stakeholders to see the
partner -

Unlimited liability andprofiti s private income

worth of the often professional services like law firms
company in

Corporations: ow n e rs are shareholders (transferable shares)

H

L
has its own
identity have clear distinction between private andcompanymoney
D 2 equity accounts:Retained
earnings share capitan
-
limited liability - only
haveto pay what they invested

·public is
private

Bookeeping-basic accounting equation:
Assets -
Liabilities Equity
-

company
Y ↓The total value of the
whatt he owns. what
it others:
owes to Corporation to its owners
Resources claims
againstassets
only changes if total value of what it it
andwhat
e.g. Cash, inventory, buildings e.g. Loans, unpaidsalaries, owns

maschines, patents, trademarks, unpaidtaxes, accounts payable
owes
accounts receivables
like
changes (exchanging an for another
asset does not affect the
Supplies (short-term use, value of the corporation)
paper)
if laptop NOT
e.g. corporation buys a and pays in cash it
d oes
change the
equity
of the firm

e.g. 2:corporation buys loky of strawberries andthe producers send the bill
month

Equation
which be
needs to paidwithin a

can also be rephrased: =does NOTaffect

payable :
equity, inventory
liabilities increase
increases: assets andaccounts

Assets liabilities Equity
=
+

But with the SAME amount so no
change in
equity

liabilities
incorporationbuysstrawberries
Assets Equity
=

e.g. egs: for it) buts ells itfor 2) it
w i ll influence equityin
-

accounts 5
Cash 75
payable

Equipment 40
Original Equity 110

115
115

, Transactions that affect equity:
1
-

Revenue:positive change in value equity
of

income from
selling products/services (eg. sales, fees, etc

Expenses:negative change value of equity(long-term usel
-

in

costs of consuming inventory resources/personal the process of earning Ceg. saleries, rent, COGS, intresto f loans)
·

in revenue

·Net difference between the two
income:the in a
period changei n equityin a period due to its
operations

2
Transactions with owner:

·Investmentof shareholders
(eg. buying shares) increasing equity
·Dividents that
paidto shareholders
a re decreases
equity byreducing retained
earnings
L NOTan
expense

Components of owner's equity. ↑ purpose
to be
to raise capital for firm byissuing shares thata re going
soldon stock
market, increasing cash andshare
capital
I share capital ordinary theamountpaidin byshareholders for the ordinary
shares they
purchased

2
Retained earnings Cumulativeincome from previous periods which are not
yet paidout as dividendents

:Net income of all periods the of dividents all
payout expenses
- -

Assets Liabilities Equity = +

↑
share capital
ordinary
RetainedEarnings
↑
Revenue -

Expenses -

Dividents

·
Managment Accounting:
>
Financial Accounting usersoutside the corporation for internal users, not subjectto
laws, regulations andstandards

↓
subjectto
laws, regulation andstandards

Generally acceptedaccounting principles (GAAP)
↓ Interational Financial Reporting Standards (IRS)

determinedbyIASB
·mandatory
for
listing companies in over 150 countries

·

objectives:to provide financial information that is useful to users in making decisions
related to providing resources to the
entity

, Characteristics of useful information.
1. Relevantpredictivevalue, confirmatoryvalue (confirm whatw e already
know, material clarge enough to decisions)
change

2. Faithfullyrepresented:completed, Neutral, free from error, factual

Principles B Assumptions under IRS:

Monetary unitassumption assets, liabilities, equity, revenues, expenses should be expressedin monetaryterms
·

↓it's aboutm oney (enables accounting to
quantify measure economic event, andexcludes information e.g. about health of
CEO

·

Measurement principle:

Historical assumption recordassets attheir original cost, so
-

cost if value rises, you still reportthe cost
original

Fair recordthe value,
-

Value Principle:you current
only usedin situations where assets are actively
traded
·

Economic entityassumption:financial statements shouldreport
aboutthe
corporation separation between private and

corporation money

Financial statementsannual reports Revenue
-

Expenses
Income statement:revenue for
⑭come
expenses presented, resulting Net loss income
-

and in

loss or net
over a specific period.
a

Retainedearnings statement:summarises the
-

amount in retained
changes earnings for Beginning RE
of +
Netincome
time specific periodof time. -

Dividents
like
Ending RE
6 months,
I month
-

Statement of cash flowssummarises information about cash inflows Beginning
+
Cash
cash
inflows
-

Cash outflows
andcash outflows for a
specific period. Ending cash

Comprehensive income
Net income
statementcomprehensiveincome items that
-

a re -

comprehensive income

includedin
not the determination of net
income. Comprehensive income

④
D C

statement of financial position (balance sheets assets,
-

Assets Liabilities
Cash

sinscyepoei
liabilities and equityof a companyata specific date. other
Equity
·

are capital
Retained
earnings
& & ⑩
financial position Bincome statement
-
main financial statement:Statment of
other
equal each
most

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Full Summary - Financial Accounting 1 for Business (Midterm + Endterm)

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