Summary
Summary Chapters 1 -8 Mid-Term Financial Accounting 1 UvA
- Course
- Institution
- Book
Detailed Notes and Summaries from Chapters 1 -8 and Lectures 1 - 6 of the Financial Accounting 1 Course at the UvA.
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
FAC2601 Assignment 4 Semester 2 2024
-
FAC2601 Assessment 3 Semester 2 2024
-
Accounting Categories (Debit and Credit Balances) - Financial Accounting (FAC)
Seller
Follow
sergeisysoyev
Content preview
Financial Accounting 1 Chapter 1 – 8 SummaryChapter 1: Introduction to Accounting (incl. Lecture 1 Notes)
What is accounting?
- Identifying (select economic events – transactions).
- Recording (record, classify and summarize – bookkeeping).
- Communicating (prepare accounting reports).
an organization’s economic events to interested parties.
Used by:
- Companies (from sole proprietorships to huge conglomerates)
- Non-profits
- Privat entities
Proprietorships v Partnerships:
- Many companies start out as proprietorships.
- Very small companies often stay proprietorships for their entire lifetime.
- Characteristics of sole proprietorships: no clear distinction between private money and
company money; proprietors have unlimited liability for all debts of their company; profit is
private income.
- Partnerships are generally the same yet, ownership is split between 2 or more people.
Corporations:
- Formal separation of ownership and decision making.
- Corporation is a legal entity that has many of the same rights as individuals have.
- It can complete transactions (e.g., buy, sell own)
- Corporations are owned by multiple shareholders.
- Owner shares can be transferred.
- Owners have limited liability.
Accounting in Corporations:
- Owners of the corporation are not necessarily actively involved in decision making.
- Managers are hired to run the corporation.
- Owners invest their money in the corporation in the expectation of receiving a positive
monetary return.
- Owners want periodic updates on the financial state of the company.
,Structure of a Corporation:
- Is owned by one or more owners – owners can be people as well as other corporations or
hedge funds.
Decision Making within a Corporation:
- Owners typically hire mangers to make decisions on their behalf (the major shareholders
make executive board).
Assets & Liabilities:
- Assets – everything that a company or individual owns. Examples – cash, inventory,
buildings, patents, IT systems, trademarks, accounts receivable, machines.
- Liabilities – everything that a company or individual owes. Examples – bank loans, other type
of loans (bonds), accounts payable, unpaid salaries, unpaid taxes.
Equity:
- The value of a corporation to its owners.
- The difference between what the corporation owns – Assets – minus what the corporation
owes – Liabilities.
- Equity = Assets – Liabilities
Revenues and Expenses:
- Company activities result in revenues and expenses.
- Positive revenues and negative expenses changes in the value of equity.
- Common source of revenue are: sales, feeds, interest, etc.
- Expenses are the costs that arise from using the firms’ assets to sell etc.
Changes in the Value of Equity:
- The value of a corporation’s equity can change in 2 different ways: operations – revenues and
expenses resulting in a net incomes
Transactions with owners:
- Share purchases – investments in the firm
- Dividend payments – return on investments to the owners.
Changes in Equity:
- Increases caused by investments by shareholders and revenues
- Decreased by: expenses and dividends to shareholders
2
, Equity Components:
- Share capital-ordinary (‘paid in capital’) – amount the shareholders invested in the
corporation.
- Retained income – all profits earned by the firm that has not yet been distributed via
dividends.
The Basic Accounting Equation:
Equity = Assets – Liabilities
A = L + SC + REV – EXP – DIV
Accounting Interested Users:
- Potential Owners
- Owners
- Creditors e.g. banks or venture capitalists
- Suppliers
- Customers
- Non-profits
- Government’s agencies - Chamber of Commerce, SEC, AFM, DNB, etc.
- Tax Authorities
- As well as internal users, i.e. anyone from top executive managements to regular employees
at the bottom of the pyramid.
Types of Accounting:
- Management Accounting: users inside the organization. This accounting is not subject to
specificity unless company conduct codes.
- Financial Accounting: users outside the organization. This accounting is subject to laws,
regulations and standards e.g. IFRS.
Chapter 2: The Recording Process (incl. Lecture 2 Notes)
Statement of Financial Position:
- Discloses an organizations’ financial position at a specific point in time (typically at the end
of the fiscal period (usually quarter or year).
Types of Assets:
- Intangible – goodwill, patents and licenses, copyrights and trademarks.
- Natural Resources.
3
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller sergeisysoyev. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for CA$8.42. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
75632 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now
Recently viewed by you
