Professional Documents
Culture Documents
4.01 Accounting and Finance
4.01 Accounting and Finance
01 Accounting and
Finance
What is Accounting?
• Method of
reporting financial
activity of a
business
• Financial
transactions
recorded in an
orderly fashion
Accounting Equation
Assets =
Liabilities +
Owner’s
Equity
Assets Company
Cars
Anything of
Value
owned by the
Business
Office
Furniture
Cash / Building /
Accounts Real Estate
Receivable Office
Equipment Office Supplies
Liabilities
Money owed by
the business
Accounts Payable
Taxes Due
Mortgage Payable
Office Supply Store
Utilities Corporation
Financial Statements
• Financial Statements
• Written reports that describe the
financial health of a company;
prepared regularly on quarterly and
annual basis.
Balance Sheet
Income Statement
Statement of Change in Owner’s
Equity
Financial Statements, cont.
• Balance Sheet • Assets
• Anything of value
• Reports assets, that is owned by the
liabilities, and business.
owner’s equity • Liabilities
on a certain • Money owed by the
date business (debts,
accounts payable)
• Owner’s Equity
• Net worth of the
business
Financial Statements, cont.
• Income Statement • Income/Profit
• Financial Statement • Results when a
of a business that business’s income is
reports the revenue, greater than its
expenses and the expenses.
net income (loss) of • Loss
a business for the • Results when a
fiscal period. business’s expenses
are greater than its
• Revenue income.
• Amount of money that a
company earns • Fiscal Period
• Specific period of time
• Expenses covered by an
• Costs of maintaining accounting statement or
and operating a report (1 month or year)
business.
Financial Statements, cont.
• Statement of
Change in
Owner’s Equity
• Financial Statement
of a business that
reports the changes
that have occurred in
the owner’s equity
account during the
fiscal period.
Accounting Activities
related to orderly record-keeping of financial information