Chapter 2 - Reporting investing and financing results on the balance sheet. In the previous chapter, you were introduced to the four main financial statements: the balance sheet, income statement, statement of retained earnings, and statement of cash flows. This chapter focuses on just the balance sheet and the accounting system used to produce it. | Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Fundamentals of Financial Accounting 3e by Phillips, Libby, and Libby. Chapter 2 Reporting Investing and Financing Results on the Balance Sheet PowerPoint Authors: Susan Coomer Galbreath, ., CPA Charles W. Caldwell, ., CMA Jon A. Booker, ., CPA, CIA Fred Phillips, ., CA Chapter 2: Reporting Investing and Financing Results on the Balance Sheet Building a Balance Sheet Assets amounts presently owed by a business to creditors. the amount invested and reinvested in a company by its shareholders. resources presently owned by a business that generate future economic benefit. Stockholders’ Equity Liabilities = + 2- The balance sheet is structured like the basic accounting equation: Assets = Liabilities + Stockholders’ Equity. Assets are resources presently owned by a business that generate future economic benefit; liabilities are amounts presently owned by a business to creditors; and stockholders’ equity is the amount invested and reinvested in a company by its shareholders. Transactions and Other Activities 2- Part I How do you know if a business activity is considered an accounting transaction? Look for two types of events, both of which are considered accounting transactions: External exchanges involve exchanges in assets, liabilities, and stockholders’ equity that you can see between the company and someone else. For example, when Starbucks sells you a Frappucino®, it is exchanging an icy taste of heaven for your cash, so Starbucks would record this in its accounting system. Part II Internal events occur within the company, for example, using some assets to create an inventory product. Study the Accounting Methods 1 Analyze 2 Record 3 Summarize A systematic accounting process is used to capture and report the financial effects of a company’s transactions. A transaction is a business activity that affects the basic accounting equation. Duality of . | Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Fundamentals of Financial Accounting 3e by Phillips, Libby, and Libby. Chapter 2 Reporting Investing and Financing Results on the Balance Sheet PowerPoint Authors: Susan Coomer Galbreath, ., CPA Charles W. Caldwell, ., CMA Jon A. Booker, ., CPA, CIA Fred Phillips, ., CA Chapter 2: Reporting Investing and Financing Results on the Balance Sheet Building a Balance Sheet Assets amounts presently owed by a business to creditors. the amount invested and reinvested in a company by its shareholders. resources presently owned by a business that generate future economic benefit. Stockholders’ Equity Liabilities = + 2- The balance sheet is structured like the basic accounting equation: Assets = Liabilities + Stockholders’ Equity. Assets are resources presently owned by a business that generate future economic benefit; liabilities are amounts presently owned by a business to .
