Accounting

Core of financial accounting revolves around the following financial statements:

* Statement of Comprehensive income

* Statement of Financial Position

* Statement of Cash Flows

* Statement of Changes in Equity

Net income = the excess of revenues over expenses

Double-entry accounting, forms the basis of financial reporting to shareholders

* The accounting process begins and ends with people making decisions:

Business activities -> recorded in Accounting System -> produces Financial Statements -> influences Business Activities

* Financial Accounting and Management Accounting

Financial Accounting provides information for decisions makers outside the reporting entity (investors, creditors, government agencies, and the public)

Management Accounting provides information for managers inside the company. Ex of management accounting info include budgets, forecasts and projections that are used in making strategic decisions

Organizing a business:

| Proprietorship | Partnership | Corporation |

Owner(s) | Proprietor – one owner | Partners – two or more owners (individuals, corporations, partnerships) | Shareholders – generally many owners |

Personal liability of owner(s) for business debts | Proprietor is personally liable | General partners are personally liable; Limited partners are not | Shareholders are not personally liable |

OBS: | Fcaebook. | Risky- an irresponsible partner can create large debts for the other general partners without their knowledge or authorizationLLP- limited-liability partnership each partner is liable for partnership debts only up to the extent of his investment in the partnershipEach LLP must have one general partner with unlimited liability for all partnership debts.Big 4 accounting firms are organized as LLPs : Deloitte, E&Y, KPMG, PWC) | Advantage- ability to raise capital from issuance of shares to the public. Ex Mark Z and other FB founders incorporated their company in 2004, and received...